Few stocks are streaking - while fewer are peaking. That's continuation, and it is just what happens when you have small-and-mid caps 'back-fill' the void I discussed as under the market, allowing the S&P to remain strong while most upside really is focused on the Nasdaq and the Russell.

Pixabay

So 'better breadth' was the key, and so far earnings reports aren't throwing all of the gains to the shoulder even while the destination goals are achieved for the S&P, but not necessarily an inhibitor of individual stocks that execute on a few business models & plans, many of which have been stalled for months.

By no means am I suggesting we won't get a shakeout in August/September (at least parts), following the signals that the economy is 'hanging in' (per my 'softish' landing call for many months), and all of these strategists / analysts, only now getting more bullish, are probably right (finally) from a macro view, at the same time you often get this kind of switch from bear-to-bull near peak short-term behavior, although that's still pending.

Seasonally this is all in-line with my call for a move from June into early-mid July, and while that was a confirmation of our 'bottom call' last Fall in a tough 'inverse head & shoulders' for S&P, it nevertheless has us arriving at this point where capital markets may have bottomed, M&A may start perking up, and a FOMO psychology dominates. That's what I've suggested for some time with a slew of money managers having missed or under-performed increasingly in a desperate mode to achieve performance in the year's 2nd half, which as we all know, is usually the tougher time of year and rife with alternating moves.

In-sum:

It was only two weeks ago permabears were still giving talks as all the financial sites were quoting thoughts like (the most prominent of them with a call for) the next several years being very dark and gloomy for investors. Now they (I'll not name but you may know) say things like 'sounds like can’t predict what will happen' or they simply capitulate.. FOMO.. fear of missing out.

In a couple charts below, I'll contrast (because some compare) 1929 with now, and while big-caps did get excessive (as our projected rally gets stretched for the short-term anyway), I suspect any shakeout will be that, not catastrophe. I think it comes down to the relative 'under-valuation' of all but the mega-caps, if we indeed get our 'softish' landing, more benign Fed, and avoid global war.

Reversion to the mean (for S&P) or not in August/September, we still expect the 2nd half of the year overall (not all the time) to favor small-midcap stocks. Volume and 'breadth' tend to lead Index prices, and what happened as well as needs to continue, but persistance short-term borders on unsustainable.

(I'll be posting this rumored design change on the iPhone 15 on Twitter, and suspect it will sell better than the iPhone 14 'if' they update the base model which was rather bland this year. 'Pro' may become the 'Ultra'.)

One more historical analogy that I know some are pondering. Depression of the 1930's. It's a sequel some of the biggest bears have pedaled as coming for years (or longer), and you'll hear this again 'if' we get a forthcoming drop.

I only agree with the permabears on one aspect. That's that the 'conventional crash' and Depression was the result of a "Federal Reserve policy error". That was an argument the Fed tightened credit when it should have loosened it. It's also why periodically over the years I'd criticized believing Keynesian policies.

A conventional 'Fed error' case is flawed. What actually happened was credit expanded rapidly in the 'Roaring 1920s', it's why they were called Roaring. In the post-pandemic frenetic spending spree I called it 'Roaring '20's two (in this era). The big difference is that the market crashed last year, and leadership to the upside (until our recent rally) was relegated to major (mostly tech) big-cap stocks, and not a mass revival (better breadth) .. whereas in the 1920's there was a gigantic credit bubble pushed stocks and other assets to unsustainable over-valuation (and inflation).

Later, the Fed got belated religion (they still have such tendencies as we've pointed-out in the last two years) to limit expansion of credit and consumption, which seems to have eased inflation's pace, even as I believe it was more organic (and not just from monetary policy).

Anyway, the point is they can avoid a debacle by staying backed-off, by seeing the risks on those they purport to help if they don't stop tightening, as we can navigate this with the 'softish' landing I've preferred for over a year now.

Besides all this, credit risk remains in the market, and we're not convinced of migrating the S&P further into the stratosphere without some sort of correction or 'reversion to the mean'. That's due and probably after the last 'bear' flips :).

Bottom-line: 

There are mortgage bonds (not my field), Yen-carry trade issues (also not my field but I can see how a currency crisis could emerge), and of course the property default issues we've talked about. Maybe we better add a horrible Summer of hurricanes and earthquakes.

Wednesday is more of the same for markets. Trying to grind holding traction.

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