Broad equity market topping formation
The hosts argued that despite strong individual earnings from mega-cap tech, the broader equity market is exhibiting structural weakness and forming a major top.
The argument
They noted that market breadth has deteriorated significantly, with only 34% of S&P 500 stocks trading above their 50-day moving average. They argued that the equal-weight S&P 500 and Russell 2000 indices are in clear breakdown mode, suggesting the market cap-weighted index is being artificially sustained by a few names like NVIDIA.
The thesis, stress-tested
✓ What validates it
- ✓S&P 500 failing to reclaim and hold its 50-day moving average
- ✓Further deterioration in the percentage of stocks trading above their 50-day moving average
▸ Risks discussed
- ▸NVIDIA earnings or other mega-cap tech performance sparking a short-term retest of market highs
- ▸A swift recovery and sustained close back above the 50-day moving average
Hear it yourself
"While NVIDIA has certainly spurred the, market cap weighted S and P higher and the Nasdaq a little bit higher on its, positive earnings reaction, we still have a definitive downtrend and very little reaction to things like the equal weight S and P 500 ex index or the Russell, which both are in clear breakdown mode."
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