MarketSurge powers the charts in this video.
The main indexes remain in a range not too far from their all-time highs. And yet, there have been some cracks under the surface. The number of distribution days is increasing. Most megacaps sold off after earnings. High-momentum leaders came under pressure last week – HOOD, RCL, PLTR, APP, etc. One of the leading sectors year-to-date – financials, is also starting to lose ground. There’s still strength in select Chinese and biotech stocks but this is hardly enough to sustain the indexes.
What’s next for the market?
No one knows. The only thing we can do is develop scenarios and be ready to act.
The bearish scenario assumes that megacap and momentum stocks are leading and their weakness will be felt in the rest of the market. If the government is serious about spending cuts and raising tariffs, the market will likely blink and price it at some point. A 7-10% correction would not be a big surprise.
The bullish scenario supposes that dips will remain tepid and continue to get bought. The best buying opportunities this year happened after headline-driven pullbacks.
Both scenarios are equally likely. What matters is what we do. The number one goal is always to keep drawdowns small, so we can grow our capital quickly. We do that by keeping losses small. If we can benefit from a quick correction with some tactical Put options and inverse ETFs, we will do that. We already took some META and TSLA Puts last week. Corrections create the best buying opportunities once they are done, so building a list of potential leaders will help us to take full advantage of the next uptrend.
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