To The Moon

$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$ $iShares Russell 2000 ETF(IWM)$

Learnings and conclusions from this week’s charts:

• Mag-7, the 493, cap + equal-weighted S&P500 have all peaked.

• Market messiness is coming right on schedule (seasonally speaking).

• Retail trading behavior is consistent with the hints of regime change.

• Fed rate hike risk echoes global trends, and may weight further on stocks.

• The backdrop of expensive valuations and low cash allocations is not ideal.

Overall, there has been a distinct change in tone this past week in markets, the flare-up in geopolitics is making markets wary along with rising rates and AI/capex concerns. Maybe it is passing turbulence, but this week I explore some of the issues to keep front of mind on the risk front so we don’t get blindsided.

1. Peak to Peak: 

the “Lag-7” have come under renewed pressure after putting in a lower high (n.b. if they take out the 25 June low, that will make it a lower high and a lower low; which is the technical definition of a downtrend, so for MAGS; $61 is the key trigger level). Meanwhile the “S&P 493” has now also peaked…

2. Equally Peaking:

looking at the S&P500 itself, in both equal-weighted and cap-weighted terms it is looking a little messier. Breadth has also peaked for now at the same level it peaked at the last two times, so it is starting to have the look and feel of what might end up being a larger correction/consolidation phase.

3. Volatility Season: 

and seasonally speaking it is right on time. There is a seasonal tendency for volatility to rise this time of the year. Beyond the stats, there are a few boogeymen out there (e.g. Iran/regional war risk, US mid-terms, prospective Fed rate hikes, oil and inflation risks, AI doubts and bubble-deflation risk, trade war echoes, rising global bond yields).