The Long Investor
Airline Captain & Investment Analyst, Technical/Fundamental Analysis
US large-cap equities are vulnerable because earnings have not caught up with total market capitalization. The market is farther from its 200-week moving average than at any point in 18 years, and cracks are starting to show; staying bullish ignores these risks. Rate hikes remain possible, oil is still high, and yields may climb again, so now is the time for caution. x.com x.com
US large-cap equities look vulnerable because 10 companies alone have kept the index resilient while 490 stocks struggled. Earnings need to exceed expectations to carry these concerns; any miss from the Magnificent Seven will trigger a selloff, and a pullback in just five to seven positions could cause a market correction. x.com x.com x.com
US equities look vulnerable to a significant correction before another sustainable rally: 3.4% inflation, roughly $100 Brent, a 5.2% 10-year yield and just 29K new September jobs contrast with fresh index highs, while the Magnificent 7 make up 34.9% of the S&P 500. Strong AI earnings expectations and liquidity could keep shares elevated longer than expected. x.com
High debt and rate hikes make a big US equity correction likely. Warsh said nothing useful despite hot CPI and PPI after two weeks of hawkish rhetoric, while the rest of the Fed fence-sits. A debt crisis is incoming, and some funds will blow up soon. Big caps are the last leg; the bigger correction could be something like 20%. It is not a good time to buy dips. x.com x.com x.com x.com x.com x.com x.com
US large-cap equities do not look like a bubble at current forward valuations. The S&P 500 forward P/E is below both its five- and ten-year averages, while tech and momentum have suffered their worst five-month decline by far. x.com
US stocks remain vulnerable because leveraged long positions could amplify an unwind of the mania. The SPY-versus-long-Treasury trade has given back only a few weeks of its gains. x.com
US large-cap stocks are not oversold, and inflation is likely to drag them lower after crushing momentum names, as in 2022. They just posted one of the most dramatic blow-off tops since Covid while the Fed is hawkish, Brent is at $100 and the 10-year yield is 4.70%. With the S&P 500 just 3% off its highs, a Fed put is not near and is unlikely at $100 Brent. Assuming the broad market is safe because high-duration momentum already sold off is a huge mistake. x.com x.com x.com
Strong corporate earnings make weekend crash panic a contrarian buying opportunity in US large-cap equities. Most individual stocks have already gone through bear markets despite the S&P 500 nearing record highs; weekend social-media panic rarely leads to a genuine economic downturn and instead offers long-term investors an attractive entry point. x.com
US large-cap stocks are frothy and now need years of earnings to validate today's prices, even though the rally is not irrational. Per FactSet, S&P 500 earnings are up about 28% versus 13% expected, but the Shiller P/E is near 42, close to 1999-2001 extremes. Per @KobeissiLetter, leveraged ETF assets hit a record $177B and the leading-to-coincident indicator ratio of 0.84 matches the 2008 low; per @charliebilello, 90+ day delinquencies hit 13.1% for credit cards and 5.6% for auto loans. x.com … Show more
US stocks look increasingly vulnerable: high interest rates are making long positions harder, while more bearish setups are appearing as the market worsens. x.com
Rising S&P earnings revisions and a Nasdaq valuation far below the 2000 bubble level argue against a bull trap in US large caps. Nasdaq trades at 18x forward earnings versus over 80x in 2000. Positive breadth divergences, record short ETF exposure and put volume, and semiconductors waking up add to the case. In all 19 post-midterm instances cited, markets were very green over the following 12 months. x.com x.com
US large-cap equities look too close to their highs for a weak macro backdrop. Oil has crossed $100, rates are at 5%, inflation is worse than reported and real jobs are scarce, yet the market sits only 2% off its highs. The S&P 500 is about to lose its 50-day moving average. x.com x.com
