From the desk of Willie Delwiche.
Key takeaway: A diminishing appetite for risk combined with deteriorating breadth creates a backdrop conducive to equity indexes catching down to the weakness that has been on display beneath the surface. While bulls remain elevated overall, that could change very quickly as the stage is set for a complete sentiment unwind. Optimism has already begun to edge lower, with AAII bulls dropping to their lowest level since October. Any major signs of adversity could rock the optimistic outlook of a market that has gone relatively unchallenged for the last year.
Sentiment Report Chart of the Week: Risk Off Resolution![](https://media-allstarcharts.s3.amazonaws.com/wp-content/uploads/2021/07/willie0720A.png)
After several months of consolidation our risk on/risk off ratio is resolving in favor of risk off assets. This was anticipated by the breakdown in the Broker/Dealers index (relative to the S&P 500). A combination of still elevated optimism and less appetite for risk presents a meaningful headwind for equities.