Good morning: Yesterday, 337 S&P 500 members finished higher. The market index fell 1.21%. This was one of the worst performances on a day with more than 300 advancing stocks since Bloomberg began tracking the statistic in 1996. The only other day was an AI one… back in January 2025 after the announcement of DeepSeek… So, anyone saying the market is collapsing needs to relax. If AI were the problem, why were the utilities getting a bid… and industrials… and the other inputs? I want to stress we shouldn’t mistake decent breadth for a healthy market. As I noted last night, hedge funds have been big sellers this month, and that Goldman book sits at the 99th percentile for shorts. This is one reason why Goldman (according to various outlets), has said we’re ripe for… a short squeeze. There’s no timing here, but if history were a guide, I’d look to the March 2022 Fed meeting. The issue, from what I’m reading, is that there isn’t much demand for actual investment right now… there’s a rearranging of positions, but not much enthusiasm. We have two setups for the next week… the first is another disappointing AI earnings report that could pull our cap-weighted numbers down a lot more, even if most stocks hold. Ore, we see rates continue to roll down, energy costs drop, or AI spending improves. Those are the conditions that send the shorts into a frenzy. Goldman’s data make that plausible. They don’t put a date on it. You have to trade what is in front of you… because we know the macro… WTI jumped above $100, the 10-year has moved under 5%, France just saw its bonds blow out against Germany again, and we have a Fed meeting next week... Continue reading this post for free in the Substack app
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