Chris
Engineer & Entrepreneur, Equity/Crypto Swing Trader, Macro & Trade Setups
Capital rotating to new market leaders can keep the S&P 500 making long-term highs even if cyclical bubble stocks fail to recover. The Magnificent Seven have established themselves as long-term leaders, but quite a few names look incredibly bloated; some former favorites may never regain their highs or valuations, and others will not survive the rotation. x.com
Extreme fear suggests the SPDR S&P 500 ETF Trust is closer to a local bottom than a local top. The Fear and Greed index reads 22, VIX is at 18, and the fund is only 2% below its all-time high. x.com
A sharp VIX spike followed by a reversal has historically favored SPY over the following weeks when VIX was at or below 25. After a 21% spike Friday and a 7% fall today, SPY's one-week return averaged 1.10% in 14 comparable events over the past decade, with gains in 12; the next-day average was just 0.07%. Could this have been capitulation? x.com x.com
With the VIX at 14.53, US stocks are back in the low-volatility zone where it pays to trim positions and reduce risk in the S&P 500 and Nasdaq 100. VIX levels have marked every major buying and selling opportunity since 1990, from the dot-com crash to the 2025 tariff selloff: below 20 means trim, 20-30 hold, 30-40 start buying, and above 40 buy the panic. For now, let winners run and do less. x.com
Improving breadth and GPUs massively outrunning depreciation costs put US-equity risk/reward heavily in bulls' favour. Some 59% of S&P 500 stocks are above their 50-day average; the Nasdaq 100 is positive over five trading days, and small caps bounced off their 200-day average. Buy gradually, as the selloff may not be completely over. x.com
Crowded fund shorts despite market participation give the S&P 500 a strong upside bias, reinforced by midterm seasonality. Net leverage this low usually appears deep in a bear market or near the end of capitulation. A rally is highly probable, but another 1.5 to 3 weeks of pain is possible: the market could be lower in two weeks, higher in a month and much higher in six months. The S&P 500 has historically gained over 14% after midterms, though there are no guarantees. x.com x.com x.com x.com
Energy's continued push on inflation is concerning for the S&P 500. Energy's strength relative to SPY looks very similar to the start of the 2021-22 inflation bear market, when repeated closes above the 50-week average preceded a surge. Last week's close above the five-week average echoes March 2026. x.com
The S&P 500's post-midterm record makes 2027 pullbacks worth buying, though history does not guarantee another gain. It rose in the year after all 19 US midterm elections since 1950, averaging 15.4% over 12 months, 12.4% in six months and 5.7% in three months. Take advantage of market swings by buying pullbacks. x.com x.com
Post-midterm seasonality and hedge funds' flip from long to short make this reset the next great opportunity to build for a bull market driven by the Innovation Revolution. Since 1950, the S&P 500 has gained 29.9% on average over the next 15 months in all 19 comparable years. This selloff looks pre-war driven; military action looks nearly certain and may be the most anticipated and discounted ever. A 90-day, 32% Nasdaq bear market preceded the dot-com era's final 18-month melt-up. x.com x.com
The S&P 500's elevated P/E masks concentration in just a few stocks, making index exposure less appealing than selective stock picking for risk and reward. Its P/E is well above the ten-year median; digging into individual constituents looks more sensible than buying all 500. x.com
US equities tend to perform well after October in midterm years, making the historical pattern hard to ignore. Since 1950, the S&P 500 rose in 19 of 19 observed 12-month periods after October, averaging 16.6% with a 3.0% worst return. October and November also averaged gains, but history is not a promise. x.com