Wednesday's Market Minute: This Bull Run Is Looking Weary

The 9-month chart for the S&P 500 looks something like an ascending triangle: steady, stair-step higher lows that lead right up to a battle-tested ceiling at the 4,200 level. The momentum of such a chart favors a breakout higher, but the longer it takes, the more the odds shift in favor of a reversal lower. I see three signs that this extraordinary seven-month rally is on its last leg:

1) Over the past two weeks, bitcoin went from testing the highs of its range to trying to hold onto lows (around 27,000). This is the level to which bitcoin surged when the Feds ran to rescue regional banks back in March. Per usual, bitcoin was a tell that the broad market was about to price in rate-cuts and go risk-on. If it breaks down from here, it likely means growth stocks will follow.

2) The dollar is rising. It’s not much yet, but it would be a major problem for investors if it continues. Despite the dollar’s huge run last year, investors have quickly reassumed their bearish positioning. A weaker dollar is once again, in my opinion, the most consensus macro view on Wall Street, and thus the most likely to disappoint. The U.S. dollar only goes up for two reasons these days: either the market has underestimated how hawkish the Fed will be, or people are buying cash as a last-ditch safety trade. Without any other signs of fear in the market (VIX is low, stocks are firm, bonds are quiet), my guess is the firming dollar is a sign the Fed is ready to start pushing back on the rate-cuts priced in for later this year.

3) There’s only so much tech stocks can do. I’m generally not a big believer of the narrative that concentrated strength in technology stocks is somehow a problem (it’s just math – if they go up, usually the market does too), but the big-tech skew throughout this earnings season has been the most extreme in history. Apple (AAPL) and Microsoft (MSFT) now represent 15% of the entire market. Apple’s never beaten the benchmark by this much. Since the S&P 500 peaked last year, Apple’s contributed a bigger portion of each bear-market rally, yet still hasn’t exited its own technical downtrend. Until it trades above last summer’s $176 high, the best way to think about Apple and its peers is as powerful horses being whipped a bit too hard by the stagecoach. They’re more likely at this point to break down than accelerate.

Image sourced from Shutterstock

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.