Savior Market Conviction Compass
Market Conviction Compass: February 13, 2026
Remaining Conviction Level: 62
(Higher = more conviction to own risk; Lower = less) Subscribe below or click here
The Compass framework evaluates five key groups across valuation, credit/rates, breadth/momentum, sentiment/positioning, and macro factors. Through Friday’s close, the overall picture shows a market that remains technically intact but is experiencing the first meaningful deterioration in months. A reading of 62 is a slight increase from our previous Savior Market Conviction Compass – February 10th, 2026 update.
Valuation Group: Constrained but Stable
The valuation landscape continues to present challenges. The Shiller CAPE ratio sits at 39.80—down slightly from 40.17 last month but up 7% year-over-year. This marks only the second time since 1871 that CAPE has exceeded 40. The S&P 500 Price-to-Sales ratio reached 3.37, near all-time highs, while the Buffett Indicator (Market Cap to GDP) stands at 223.5%—well into “significantly overvalued” territory.
These stretched metrics have been stable-to-slightly-improving over the past month, which prevents further deterioration in the Compass score. However, they offer virtually no support for higher equity prices without corresponding earnings growth. The valuation group acts as a ceiling on conviction rather than an active detractor.
Fundamental research is a key component of the Savior Wealth Investment Philosophy. To learn more please read our Savior Wealth Fundamental Analysis Update – December 2025
Credit & Rates Group: Remarkably Benign
Credit markets continue to signal extraordinary confidence. High yield spreads compressed to 292 basis points as of February 12th—the tightest reading in over a year and well below the long-term average of 521 bps. Investment grade spreads (CDX IG) remain compressed at just 78 basis points.
The 10-year Treasury yield settled at 4.05% on Friday, down from 4.09% earlier in the week. More importantly, the 2-10 yield curve spread stands at +64 basis points, reflecting healthy steepness that typically accompanies economic expansion rather than impending recession.
This group remains one of the strongest contributors to the Compass, as credit markets show no signs of stress. However, the extreme tightness in spreads offers little room for improvement and leaves credit vulnerable to any fundamental deterioration.
Breadth & Momentum Group: First Cracks Appearing
This is where the week’s damage became most evident. Market breadth had been impressively strong through early February, with both the cumulative advance-decline line and volume breadth making new all-time highs as recently as February 6th.
Thursday’s selloff changed that dynamic. Decliners outnumbered advancers by 2.17-to-1 on the NYSE and 2.74-to-1 on the Nasdaq. Friday saw some improvement with 2,007 advances versus 738 declines on the NYSE, but the weekly damage was done.
New highs versus new lows data showed some resilience—748 new highs against 229 new lows on the NYSE on Thursday, with the S&P 500 recording 99 new 52-week highs versus 32 new lows. This suggests the broad market remains healthier than the major index price action implies, though the ratio has deteriorated from more extreme readings earlier in the year.
The S&P 500’s repeated failure at 7,000 is technically significant. This level has now served as resistance on four separate occasions. Support at 6,800 held on Thursday’s intraday test, but a break below would target the 6,720 level and then the 50-day moving average.
Sentiment & Positioning Group: Fear Returning
Sentiment indicators experienced their sharpest shift in months. The VIX surged 17.96% on Thursday to close at 20.82, marking a decisive break above the 20 threshold. Friday saw modest improvement to 20.60, but the fear gauge remains elevated relative to the sub-17 readings that prevailed through early February.
The SPX put/call ratio jumped to 1.38 on Friday, up from 1.22 early in the week. This elevated reading indicates hedging demand picked up substantially. The CBOE SKEW index declined from 145 to 139.35, suggesting tail risk concerns moderated slightly despite the volatility spike.
The CNN Fear & Greed Index plunged into fear territory at 36—down from neutral/greed readings above 50 just days earlier. This rapid shift reflects the psychological impact of Thursday’s rout.
Positioning remains a key concern. CTA trend-followers and systematic strategies remain heavily long equities. Bank of America estimates these funds could be forced to sell $86 billion of global equities if markets decline another 3.5%, creating potential for cascading technical selling pressure.
Leveraged ETF flows show speculative fever cooling. TQQQ (3x Nasdaq) experienced notable outflows after months of accumulation, suggesting retail speculation is retreating. This is constructive for reducing froth, but the speed of the shift bears watching.
Macro & Policy Group: Supportive but Less Certain
January’s CPI reading showed inflation cooling to 2.4% year-over-year—the lowest reading in months and below the 2.5% consensus. This should support risk assets by keeping the Fed on hold, yet markets treated it as a non-event. This disconnect suggests macro data is taking a back seat to technical and positioning dynamics.
Margin debt reached $1.226 trillion in December (latest data), up 36.3% year-over-year. This represents the highest nominal level on record and indicates the rally has been substantially fueled by leverage. While margin debt is a slow-moving indicator, its extreme level amplifies downside risk if forced deleveraging begins.
CFTC Commitments of Traders data through February 10th shows commercial hedgers maintaining defensive positioning while speculators remain net long but less aggressively than in prior months. The positioning isn’t extreme, but it’s not providing significant support either.
Week Ahead Watch List
- S&P 500 Technical Levels: The 6,800 support level was tested Thursday but held. A decisive break below would target 6,720, then the 50-day moving average around 6,650. Resistance remains at 7,000. Technical analysis is another key component of the Savior Wealth Investment Philosophy. To learn more please read our Savior Wealth Technical Analysis Update – December 2025.
- Breadth Divergences: Watch for confirmation or failure in the advance-decline line. If it makes new highs while price struggles, that’s constructive. If it rolls over in earnest, it confirms distribution.
- Credit Spreads: Any widening in high yield or investment grade spreads would be the first warning sign from credit markets, which have been remarkably sanguine. Current tightness offers no buffer.
- VIX Behavior: Can volatility settle back below 20, or is this the beginning of a regime shift to higher baseline volatility? Sustained VIX above 20 typically accompanies corrective price action.
- Systematic Selling: Monitor for signs of CTA or volatility-targeting fund deleveraging. These flows can create self-reinforcing downward pressure.
- Fed Communications: Any hints about the timing of future rate cuts—or the absence of them—will matter more as inflation cools. The market is pricing in cuts; any pushback could sting.
The Compass reading of 62 reflects a market that has shifted from “buy the dip” to “wait and see.” Upside momentum is fading, defensive positioning is rising, and technical structures are showing strain. The bull case remains intact as long as credit markets stay calm and breadth doesn’t collapse. But the burden of proof has shifted.
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