All-Time High S&P 500 – Is It The Selling Opp I Forecast?

Welcome back to a new week. I rooted for the Commanders. They lost. I rooted harder for the Bills. They lost. I hate the Eagles and the Chiefs. I rooted for the UCONN men. They lost. And I was so looking forward to visiting clients in Florida today where it will be 80 degrees. I think I have the flu and I canceled my trip. It’s okay. I can handle all the adversity!

On Friday the S&P 500 hit fresh, all-time highs which was a scenario I discussed last week. Recall that I was looking for this set up as a precursor for some selling or reducing risk. However, I did not think it would be a one day affair. Nor did I think that no other index would contribute. After Friday’s action, my sense was that there would be some follow through early this week to sell into.

Given the news out of China on start up DeepSeek being a cheaper and more robust alternative to the US’ offerings, pre-market trading is panicking lower with the S&P 500 down almost 2% and the NASDAQ 100 flirting with 4%.

First and foremost, I want to see how the markets behave today and this week. They were getting complacent last week with option traders loading up on the bullish side and option pricing not worrying about the downside. The most important question is whether this pullback is just another 3-5% bout of weakness or the 7-9 week 10%+ correction I wrote about in my Fearless Forecast. Preliminarily, it looks like the former.

Over the past few weeks, I had become more and more concerned about the lack of participation in the rally. However, we have seen a sort of breadth thrust which usually means more upside is coming. It will be interesting to see if today’s decline is a “throw the baby out with the bathwater” where everything gets caught up, or will the market’s underpinnings show quiet strength.

On Wednesday we sold QLD. On Thursday we bought QLD, SDS, QDEL, XLE, more TAN and more, TQQQ . We sold QID. On Friday we bought SSO. We sold SDS.