$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2609(ESmain)$ This obscure sentiment indicator just sounded another topping signal. The chart shows the ratio of trading in leveraged long vs short US equity ETFs. It surges when people are disproportionately betting on upside, and collapses then greed gives way to fear and bearishness. As you can see in the chart below, spikes in the indicator have flagged several short-term peaks over the past couple decades. Meanwhile plunges have helped flag numerous market troughs. Like most market timing indicators it does slightly better at picking bottoms than tops (as you might expect dur

Chart: Bond Bear Market Bonds have been in a 6-year long bear market, with long-term treasuries seeing capital losses of -50% off the peak. Even after factoring in interest received and reinvested (but also adjusting for CPI), those who invested in $iShares 20+ Year Treasury Bond ETF(TLT)$ 20 years ago would be flat-to-negative on their investment. As a result, bonds are Unloved (consensus bearish sentiment), Undervalued (cheap on my indicators), and Underallocated (investor allocations to bonds are at 25-year lows). And I think this could be one of the biggest contrarian setups of our time…

The global economy has been riding the tailwinds from successive waves of monetary policy easing —and this has been a key factor behind the reacceleration we’ve seen this year (despite all that’s been going on in the world). But now those tailwinds are beginning to turn as central banks pivot back to rate hikes. With lingering upside risks to inflation, we’re likely to see more and more central banks pivot to rate hikes. So we’re going to be heading into 2027 with a distinctly different macro picture to that seen in 2026 as tailwinds turn to headwinds.

Chart in Focus: Software Relative Value Once prized for their repeatable reliable cashflows and solid pace of growth, software stocks have gone from trading at a major Premium —to now a material Discount vs the rest of tech. The market has jumped to the conclusion that software is a sunset industry in the AI-age (given AI makes coding easier, and has made some software applications obsolete; increasing the pace of disruption). And as we can see in the chart below, relative-valuations have reflected that sentiment almost overnight. But when I see charts like this I think: that’s an extreme, and extremes can be a great source of opportunity. +when I hear the grim prognosis for software I think: wait a minute, if AI is really that useful then why can’t software companies use it? Why can’t the

I sent a survey around yesterday asking what people think will be the biggest surprise for investors in H2 —and so far the top-voted candidate is “AI Bubble Burst”. Looking at some of the recent price action (e.g. the KOSPI is down -20% off the peak, the US SOX putting in a major topping pattern, Japan’s Softbank down -33%), I think they might be onto something. Which brings us to this week’s chart. It’s an update of the US Semiconductors market cap weight chart, which has pulled back from record highs. When I last featured this chart I mused: “semiconductors are in the bubble phase of the bull market (which is dangerous for both bulls and bears alike!)” That remains true, and the danger is that we are in the early stages of a bubble burst (they start with initial weakness; slowly at first

In terms of upsides and bullish-rotations, one area making big moves is small caps. After retesting its big breakout earlier this year small caps have had a strong run. And as previously outlined, small caps are trading on cheap valuations vs history (with good relative value vs bonds and vs large caps too). Thanks in part to passive index investing and the primacy of big tech, small caps have become a neglected part of the market e.g. ETF market share (implied allocations) and rolling net-fund-flows for small caps are ticking up off record lows. That is a classic contrarian bullish signal. On that basis, along with cheap valuations and bullish technicals, small caps likely have plenty of room to run from here (and offer a bright spot amongst the bearish banter).

$Apple(AAPL)$ $Microsoft(MSFT)$ $Alphabet(GOOG)$ $Amazon.com(AMZN)$ $Meta Platforms, Inc.(META)$ $NVIDIA(NVDA)$ $Tesla Motors(TSLA)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ Learnings and conclusions from this week’s charts: Mag-7 has become Lag-7 (almost -20% performance gap). Across a number of indicators valuations look expensive. Strong earnings expectations are supporting high valuations. Tech stocks have becom

This week’s chart pretty much speaks for itself (+has just made a new all-time high). To clarify, what we are looking at here is the estimated annualized compound growth rate expected by sell-side analysts over a three to five-year horizon aggregated for the S&P500 $S&P 500(.SPX)$ . i.e. consensus earnings growth expectations. Or as I like to call it: Wall Street analyst sentiment. And like all good sentiment indicators there are elements of truth and elements of emotion all mixed up in it. In boom times euphoria takes hold and analysts raise their estimates as stock prices punch higher, new paradigm narratives take hold, and ultimately expectations end up overestimating even the best fundamentals. In doom times pessimism reigns, and analy

$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$ Similar to what we saw with investor allocations to cash probing the lows, investors in aggregate are running record low allocations to treasuries. You can see why in the chart below, with stocks having had a dream run while bonds have had a disastrous run. But you can also see something else in this chart. Both series look cyclical —one is in the middle of an upcycle, the other in the middle of a downcycle, and the next steps seem logical. The key takeaway is that investors

From a valuation perspective this market is divided into the Bigs (top 100) and the Big-Nots (everyone else). If you’re big you attract all the flows, have a much lower cost of capital (aka very high valuations), you suck up a lot of small companies through M&A, and to be fair if you got big in the first place you probably have pretty decent earnings and growth. If you’re small you’re off the radar, under-covered, under-valued, under-performing and probably underestimated. And even if you’re large —but not the largest, you still trade at a discount to the largest companies. As alluded, this is partly selection effects (successful companies get big), but also reinforced by the relentless rise of passive/index investing. But where things are sitting now is what you would call extreme. An