Notes from this week’s charts:

• The S&P500 closed October down -0.93% (still up +10.7% YTD).

• Meanwhile the equal-weighted S&P500 closed up +4.9% in October.

• Midterm patterns and seasonality suggest a strong run ahead for stocks.

• Value stocks are making new all-time highs following the yield correction.

• Global earnings breadth is running strong (maybe a little too strong).

See below for the full set of charts and details behind these points + the [new] market outlook section at the end for my latest assessment.

1. Happy New Month!  The S&P500 closed October down -0.93% on the month (meanwhile the equal-weighted index gained +4.9%, and Nasdaq off -6.7%), this places it still up +10.7% YTD (11.8% including dividends). With still 2 months to go for 2026 that’s a respectable YTD figure, but the last 5-months have basically been a range trade, and there are a few cracks appearing in the bull market narrative.

Source: 

2. Midterm Markets: betting markets are pricing a very high chance of a Dem House, and also fairly high chance of Dem Senate. Interestingly, that outcome has historically produced the best 3-month post-election returns (albeit with the caveat that none of those instances included the Trump factor).

Source:  @MrMBrown

3. Seasonally Sublime: and as extensively covered, seasonality is about to flip maximally positive (though see the next chart for a caveat on this).

Source: @MikeZaccardi

4. Monthly Stats: the monthly seasonality stats are revealing for a couple of reasons. First, November is the best month of the year from an average return standpoint and second-equal on % positive (historical 69% probability the market ends November up). Second, notice the best vs worst Novembers in history: +11% vs -11% (and then also contemplate that 31% of Novembers were negative).

There is a seasonal edge for November (and December), but anything can happen to throw that off, and statistically there is almost a third chance that the market closes down. Be open to upside, but don’t rely on this as your only guide.

Source: Topdown Charts Pro

5. Value Stock Index: meanwhile value stocks (VTV) are out to new all-time highs. This follows a largely yields-driven correction in Aug/Sep, which reversed in October with the peak in bond yields.

Source:  @CalebFranzen

6. Global Earnings Breadth: in other good news, the percentage of companies globally with forward earnings expanding on a year-over-year basis is at multi-year highs.

Source:  @BlakeMillardCFA

7. So Good, it’s Bad? but as I mentioned the other day, there is such a thing as “so good that it’s bad”. Earnings revisions breadth across countries has surged to the top end of the range. Notice what happened to global equities when it did this in the early-90’s (correction), and then again at the peak of the dot com boom in 2000, and 2018, and 2021. Excessive analyst optimism can be more of a sentiment signal than a fundamental signal (also check out what happened when that red line crashed to the lows and ticked up).

The exceptions of the early-2000’s and the rebound out of 2008 were truly good signs, but seeing strength in earnings revisions early in the cycle and coming out of recession is normal and healthy. Seeing surging earnings revisions and overheated sentiment late in the cycle is a bad sign.

Source:  Weekly Macro Themes - 30 October 2026

8. The Inverted View: speaking of good and bad, check out this chart — does it look like it’s bottoming? Maybe if you didn’t know it was the S&P500 inverted you might think it’s looking like it could be a buy with a potential rounding bottom. Just one of those perspective checks that’s worth doing from time to time.

9. High-Cap: this juxtaposition of charts from Meb Faber raises a couple of interesting points, first is the chart on the right shows the performance of buying the biggest stock by market-cap on the right: overall a bad idea, but it has its moments. Second, is how there has been many biggest-of-the-big stocks come and go over time, but also how the recent era has seen basically a breakout in biggening.

Source:  @MebFaber

10. Capex Domination: meanwhile tech capex continues to soar to new heights, breaking records on multiple angles, and muscling out all the rest to become the dominant spenders in the S&P500.

Source:  Topdown Charts Research Services

Thanks for reading, I appreciate your support!

US Stockmarket Outlook: 5-factor framework

I maintain my previous assessment of: expensive valuations + consensus bullish sentiment + heavy exposure to equities = the background risk setup is dangerous. Despite the Fed hesitation in October, policy remains on a tightening path, which only adds to the risk backdrop. But for now stocks remain in an uptrend, and the earnings/macro story is supportive…

Overall stance: Neutral (increasingly adverse risk backdrop, few remaining supports).

The table above uses the “Topdown Charts 5-Factor Framework” for analyzing macro and markets to give an overall assessment on the US Stockmarket.

Factor in Focus — Macro/Earnings

As noted, the earnings/macro story has been notably supportive for equities with the AI build-out and capex boom supporting a surge in (tech-driven) earnings. There has been some improvement in non-tech as well, and the economy has been relatively robust — but as the chart below shows, earnings momentum is running ahead of economic momentum due to the structural/thematic nature of it.

The problem is, again; things look about as good as it gets on the earnings momentum front (already rolling over from very strong levels). And then there’s the point that a lot of US leading economic indicators are pointing to a slowdown in 2027:

A slowdown doesn’t necessarily mean recession, you can just have a tapering off in activity or a growth scare that doesn’t cut deep. But it is risky territory, particularly when so much of the bull market narrative has been focused on earnings.

It may be difficult for the tech earnings theme to keep pumping at a time when that theme is getting tired and the economy potentially set to soften.

Hence the increased scrutiny we’ve seen recently on the earnings front and the steady whispers of doubt on the AI theme. If the economy goes, then those richly priced valuations that relied on a story of strong earnings growth will need to be adjusted (to put it euphemistically).

—

Best wishes,
Callum Thomas

Founder & Editor of The Weekly ChartStorm
and Head of Research at Topdown Charts

In case you missed it, also see last week’s edition:

The Weekly ChartStorm

Hand picked charts and insights to help you Save Time, uncover Opportunities, and stay on top of the Stockmarket Outlook

By Callum Thomas

.

Notes from this week’s charts:

• The equal-weighted index continues to rebound.

• The cap-weighted index remains under pressure.

• There are a few technical risk flags lighting up for global equities.

• Seeing a spike in volume on short ETFs, yet cash allocations are near record lows.

• Less and less stocks are outperfor…

Read more

Notes from this week’s charts:

• The equal-weighted S&P500 continues to recover.

• Meanwhile the cap-weighted is being weighed down by semis.

• Small caps have corrected big time, but there are reasons for optimism.

• Private equity stocks and margin debt are sounding warning signs.

• The market is increasingly skewed to…

Read more

Tips and Takeaways from this week’s charts:

• The equal-weighted S&P500 is following the seasonal script.

• Election cycle seasonality is very bullish for Q4 and 2027.

• (but a key question: have we already brought some of this forward?)

• Semis are slipping, and continue to trade at a significant premium.

• Macro headwinds loom in 2027, effective borrowing costs set to rise.

See below for the full set of charts and details behind these points + the [new] market outlook section at the end for my latest assessment.

1. Technical Check: after a sizeable selloff, the equal-weighted S&P500 is ticking up off the lows —breadth is also ticking up after a hefty reset. The headline cap-weighted S&P500 is also looking to be shaking-off its period of relative stagnation; likewise ticking up and even notching-up a new all-time-high.

Source:  MarketCharts.com

2. Seasonality -did- work after all? Here’s an interesting angle —if you look at the headline S&P500 index we didn’t really get a seasonal slump as many expected…

But if you look at the Equal-Weighted S&P500 it followed the seasonal script very closely: rebounding off the lows almost exactly in line with the typical seasonal pattern for the S&P500.

Source: 

3. Four-year Cycle: the seasonal implication of the above chart added to the below chart of election cycle seasonality would thus imply it’s time for a seasonal year-end rally before kicking into the pre-election year upturn in 2027.

Read more

Learnings and conclusions from this week’s charts:

• The S&P500 remains in a healthy uptrend.

• (but the equal-weighted S&P500 has seen a major correction)

• The key driver of pain in the SPXEW is rising rates.

• The Equity Risk Premium has fallen to generational lows.

• Small Caps seeing heavily crowded shorts (short squeeze potential?)

Overall, the overarching trend remains up for stocks, but rising rates have inflicted severe pain on rate sensitive sectors. Continue to monitor downside risks for stocks as the cycle progresses, but also upside risk in small caps + other sectors…

ICYMI: [Video] The Topdown Charts Approach to Generating Winning Investment Ideas (seminar on investment process) [Click Here]

1. Happy New Month! The S&P500 closed September down slightly (-0.5% m/m), but is still up +11.8% YTD (+12.8% including dividends). Zooming out, the index remains above its 10-month moving average and is clearly still in a strong uptrend (this is what a bull market looks like).

Source: 

2. Equal-Weighted Weighed-Down: however, the equal-weighted S&P500 closed September down -5% m/m, and has seen an almost -7% drawdown off the mid-Aug peak. Breadth has also plunged to the worst levels since the 2025 tariff-tantrum. And there is a very clear reason for this…

Source: MarketCharts.com

3. It’s a Rates Thing: rate-sensitive sectors have been clobbered —declining an average -10% thanks to the Fed pivot to rate hikes + global sovereign bond bust.

Read more

Learnings and conclusions from this week’s charts:

• The stockmarket has undergone a “stealth correction”.

• The equal-weighted S&P500 is down more than 5% off the peak.

• Breadth has been beaten down, and traders have been raising cash.

• Momentum stocks regaining momentum, profit margins punching higher.

• Valuations r…

Read more

Learnings and conclusions from this week’s charts:

• Tech stock ETF flows recently reached record highs.

• Foreign flows into US stocks are surging (record highs).

• CEO confidence, ISM PMIs, and freight data are turning up.

• Margin debt indicators are sounding a clear risk warning signal.

• Much of the index are heading into a buyback blackout window.

Overall, there is a lot of good news on the earnings and economy front as a broader cyclical upturn gets underway. But there are still lingering macro/(geo)political risks and market warning signs that could derail this renewed upturn…

1. Fund Flows — US Equity Funds: first up is a check-in on flows. This chart reminds me of the saying by Sir John Templeton: “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria”.

You can clearly observe those phases in the flows cycles in this chart, e.g. outflows throughout the 2020 rally, then frenzied inflows into the 2021 peak, and then outflows again through the beginning of the subsequent bull market.

And now? —looks like fading euphoria.

Source: 

2. Fun Flows — Global: similarly, global investor buying flows into US stocks look to be in the euphoria stage; record highs.

Source: Yardeni via Daily Chartbook

3. Fund Flows — Tech Stocks:  tech sector ETFs just recently witnessed their largest inflows ever, and now comprise around 50% of sector ETF assets under management. Investors the world over have a huge amount of confidence in the outlook for US stocks, to put it lightly.

Source:  Topdown Charts

4. CEO Confidence: CEOs are also gradually becoming more optimistic on the outlook; this echoes the upturn we’ve seen in the ISM PMIs and global manufacturing PMI reacceleration.

Read more

Learnings and conclusions from this week’s charts:

• Stocks are seeing a bit of pre-Fed jitters.

• Breadth has been steadily deteriorating across the board.

• Correlations, corporate bonds, and volatility suggest caution.

• Liquidity conditions are set to become a headwind for stocks.

• Growth has peaked vs value, semis are stagnating (for now).

Overall, there is a distinct bearish hue to the charts this week as technical risk flags wave all around. As noted below though, there is a bullish way for this to resolve, but a few things need to happen…

1. Pre-Fed Jitters: stocks are getting a clear case of the pre-Fed jitters, with the S&P500 slipping (especially in equal-weighted terms).

Read more

Learnings and conclusions from this week’s charts:

• The S&P500 has been experiencing some speed wobbles.

• Seasonally speaking, this comes right about as you’d expect.

• Credit markets are whispering a couple of concerns (tech, CCC’s).

• Beware of boom-bust in tech/AI particularly as borrowing blooms.

• Profit margins h…

Read more

Learnings and conclusions from this week’s charts:

• Sentiment is still majority consensus bullish.

• Stock correlations have dropped to record lows.

• Volatility (VIX) looks low vs seasonals and single-stock metrics.

• Semis are still stuck in the mud (peaked, and looking weak).

• Software is looking stronger (software …

Read more

Learnings and conclusions from this week’s charts:

• Global corporate earnings estimates are surging.

• Tech is seeing big insider buying (but also heavy shorting).

• Energy, Gold, Bitcoin seen major ETF outflows (+are all turning up again).

• Indian stocks have been punished as an AI-loser within emerging markets.

• The VIX is bouncing along the bottom of the range, seasonality says it goes up.

Overall, the global equities bull market looks alive and well, especially when you consider the surge in earnings expectations underpinning it. US tech stocks meanwhile are seeing mixed signals as a 3-month stall sets in. And on the risk front, volatility is lurking in the shadows, with seasonality suggesting spikes in the VIX (aka risks remain).

1. Global Earnings Outlook: starting global this week, similar to the trajectory of US earnings (which I highlight last week); global earnings are bucking their usual trend of sideways-to-downward movement through the year — 2026/27 EPS estimates for the MSCI All Countries World index are surging.

Source:  @MikeZaccardi

2. Global Equity Bull Market: on a similar note, the breadth of earnings globally looks good too —the proportion of countries seeing earnings downgraded (negative forward EPS on a YoY basis) have dropped to cycle lows.

This is a sign of strength and is helping reinforce the global equity bull market… but I would note that there is an element of “this is as good as it gets” (it can be a contrarian signal to see downgrade breadth drop towards zero and then turn up; but no sign of that as yet).

Source:  Topdown Charts Professional

3. Tech Insider Buying: moving on, despite the global equity bull market, US tech stocks peaked back in early June and have been consolidating ever since. One sign that they might be gearing up to rejoin the global bull market though is the strong pace of corporate insider buying.

Source:  @jasongoepfert

4. Nasdaq Big Shorts: that’s set against record short futures positioning by asset managers and hedge funds in the Nasdaq (smart money? or contrarian bullish signal?)

Source:  @MacroCharts ( )

5. S&P500 Short Interest: similarly, Schaeffer’s points out the hefty total short interest across the S&P500 components, remarking: “That's a LOT of bearish positioning sitting underneath a bull market.. and potentially a lot of future buying power if shorts unwind.”

Source:  @schaeffers

6. Forward PE Ratios: and then back on tech, the top 10 stocks’ forward PE ratio has dropped to the bottom end of the range of the past decade. It raises the question as to whether that’s a sign of a waning bull market, or a big reset bonus for bulls.

Source:  @MikeZaccardi

7. Contrarian Corner — Energy, Gold, Bitcoin: energy, gold, and crypto have fallen out of favor for investors judging by ETF fund flows. And this comes at a time where all 3 of those are seeing prices turn up again.

It’s also a good juncture to ponder contrarian investing — there are two types of contrarian setups: 1. when a thing is out of favor but getting better and is actually good; 2. when a thing is out of favor and/because it is getting worse and is actually bad. Most of the time in markets, option 1 is more profitable.

Which is another way of saying, don’t be a contrarian just for the sake of being a contrarian, be a contrarian when it makes sense. It’s the old saying by AA Milne: “The third-rate mind is only happy when it is thinking with the majority. The second-rate mind is only happy when it is thinking with the minority. The first-rate mind is only happy when it is thinking.”

Source:  @Todd_Sohn via @TheChartReport

8. Contrarian Corner — India vs Emerging Markets: another one for contrarians to ponder is India. As Jeff notes: “India's stock market has lagged emerging markets by 44.9%. That is the worst underperformance since 1996.”

And yup you guessed it, this is the AI trade. India is getting punished because consensus sees India’s outsourcing economy at risk of AI disruption… but also, the MSCI EM index is being boosted by Taiwan/Korea chip stocks. So this is basically a chart of perceived AI losers vs winners in emerging markets. The question would be, has it gone too far?

Source:  @JeffWeniger

9. Volatility Floor: arguably this one might also be for the contrarians (given how bullish the stockmarket looks), the VIX is bouncing along the bottom of the range. The loose rule of thumb in markets is: low volatility is a good predictor of future higher volatility, and vice versa.

Source:  @EquityClock

10. VIX Seasonal Script: seasonally speaking, we are right about due for a flare-up in volatility too. It’s anyone’s guess as to what might trigger it (if at all), but a few things come to mind: Fed (first rate hike incoming(?), Jackson Hole [this coming weekend!]), rising bond yields and inflation, (geo)politics (Middle East, Mid-terms, and Europe), or maybe even just something we can’t think of yet. The good news is that if we do get the fabled seasonal correction, seasonality turns positive into year end…

Source:  Topdown Charts

Thanks for reading, I appreciate your support!

Portfolio Strategy Notes — 15% Gold?

Read more

Learnings and conclusions from this week’s charts:

• The equal-weighted is turning up vs cap-weighted S&P500.

• For now this is a good thing, it reflects the bullish broadening theme.

• Earnings revisions are surging, and this is partly supported by strong macro.

• Sentiment & allocations are surging thanks to higher …

Read more

Learnings and conclusions from this week’s charts:

• Global equities are in a bull market (path of least resistance = higher).

• US equities are in a broad-based upswing.

• Investors are scrambling into tech stocks at a record pace.

• Calm macro is keeping the lid on credit spreads.

• (but) VIX seasonality says stay alert to Q3 surprises.

Overall, the global equity bull market rages on, and with supportive-benign macro the path of least resistance is likely higher. That said, VIX seasonality and known tail risks suggest still having a plan and process on the risk management front…

1. Global Equity Bull Market: global equities remain in a fully-fledged bull market with 40% of countries chalking-up new 52-week highs (and zero new lows). While things can turn faster than you expect and shocks can appear out of nowhere, this is a picture of strength and the path of least resistance is higher.

Source:  Topdown Charts Professional

2. Onwards & Upwards: back in the USA it’s the same sort of thing. The equal-weighted index has been steadily pushing higher and 200-day moving average breadth trending up —and now, after a period of consolidation and ranging, the cap-weighted index is also out to new highs.

Source:  MarketCharts.com (link to editable chart)

3. MAGS Up: both Mag-7 and ex-Mag-7 have quickly snapped back from the lows. Another victory for dip-buyers.

Source:  MarketCharts.com

4. Tech Cheap? with tech stocks stuck in the range over the past few months, ever-enthusiastic analyst earnings expectations have continued higher and higher… and hence tech is cheap on a Forward P/E basis.

Source:  @MacroCharts

5. The Techening: despite or because of this, investors have piled into tech stocks at an accelerating rate, and implied allocations to tech ETFs have surpassed 50%.

Source: Topdown Charts

6. SLOOS Signals: the latest Fed survey of bank loan officers show banks are relaxing their lending standards slightly for large and medium sized firms. This is also basically consistent with the equity bull market. The time to get worried is when bank loan officers start to tighten up standards...

Read more

Learnings and conclusions from this week’s charts:

• The S&P500 closed July down -0.1% (but still up +9.4% YTD).

• Semiconductors have seen a 20%+ correction off the peak.

• Semiconductors’ seasonality says down, volatility says up.

• REITs and defensives are sounding a cautionary tone.

• Resources capex is being crowded out by tech capex.

Overall, the carnage that unfolded last week in semiconductors is probably more likely setting up for consolidation and ranging (at best) vs the correction and resurgence like we saw earlier this year, as various risk flags continue to wave…

1. Happy New Month!  The S&P500 closed July down -0.1% on the month (vs the equal-weighted; up +0.9%, and Nasdaq; down -6.6%). This places it still up YTD at +9.4%.

Eyeballing the monthly chart you can see the May peak, but for now it’s hanging in there above its 10-month moving average, with non-tech stocks pulling their weight and helping offset some of the weakness in AI/Big Tech.

Source:  Topdown Charts Professional

2. Semis Pick-a-Path:  Semis on the other hand fared much worse, down over-20% vs June one point. Promisingly they managed a bounce off a logical support area, and 50dma breadth is looking thoroughly washed out.

But it does leave us at a pick-a-path moment; when breadth collapses like this it can end one of three ways: a bear market (e.g. 2022), consolidation (2024), correction (2025). My best guess is either bear or consolidation; we’ve had an exceptional run already, and meanwhile there are just so many macro hurdles piling up. Maybe you do get a correction situation where it punches onwards and upwards to new highs, but for now I struggle to see the catalysts for that.

Source: MarketCharts.com

3. SOX Seasonal Slump: seasonality is giving a vote to more ranging and consolidation, with a slight bearish hue all the way into October. Maybe once you get the mid-terms done, and if you can wrap up the geopolitical mess it could help clear the path higher.

Source:  @AlmanacTrader

4. Semiconductors Volatility Events: meanwhile, one for the bulls — big volatility spikes in semiconductor stocks basically served as big buying opportunities. Different this time?

Source:  @WarrenPies

5. The KOSPI Crash: the KOSPI saw a reverse crash on Friday, up +17.91% on the day, but still down over 27% off the peak. This is a classic bubble bursting situation where reckless leverage and madness of the crowd saw wild speculation in the new AI paradigm (and not helped by poor supervision; the government eagerly scrambling to try and stabilize markets on the way down, but sleeping at the wheel and even tacitly encouraging speculation on the way up).

The bounce comes off of what looks like a fairly logical support level, but it’s very common to see record breaking up days during bear markets (the biggest up AND down days tend to cluster). So I don’t think the storm has passed here quite yet. Probably needs to see another test of support and a bit of consolidation.

Source:  Topdown Charts

6. REIT Warning: I thought this was a clever observation and quite relevant given my comments on REITs last week, basically the takeaway is rising REITs can be a sign of the top (vis a vis rotation): “Not saying it's 2000 all over again. Just pointing out that when the leadership is exhausted, capital doesn't leave the market, it rotates. And one of the tells last time was the exact sector nobody was talking about.”

Read more

This obscure sentiment indicator just sounded another topping signal.

The chart shows the ratio of trading in leveraged long vs short US equity ETFs. It surges when people are disproportionately betting on upside, and collapses then greed gives way to fear and bearishness.

As you can see in the chart below, spikes in the indicator have flagged several short-term peaks over the past couple decades.

Meanwhile plunges have helped flag numerous market troughs.

Like most market timing indicators it does slightly better at picking bottoms than tops (as you might expect during a secular bull market).

The key point is it’s surged to levels last seen during the 2021 stimulus frenzy as a scramble of desperation to try and get rich “like everyone else” kicked-off in the wake of the Q1 correction. It adds to a growing list of topping signals, so I think at this point the burden of proof is with the bulls and caution is warranted.

Bottom line: leveraged ETF trading activity adds to the growing list of topping signals.

ICYMI: The Bond Bear Market (chart + survey)

In case you missed it, earlier this week I sent out a post on Topdown Charts which showed the extent of the 6-year -50% bond bear market that is still in progress… but also how it provides clues on the next steps. [Read the Post (free)]

View Post: the Bond Bear Market

Also be sure to sign up to Topdown Charts to get more macro insights & ideas for global multi-asset investors [click here].

Bonus Chart: leveraged ETF AUM

Assets Under Management in leveraged long US equity ETFs surged to a record high shortly after the market rebounded from the Q1 correction, but has since slipped back just as sharply. Meanwhile AUM in leveraged short ETFs has barely blipped up off the lows.

This is one of those charts to keep tabs on if the market does actually roll over into a deeper and more drawn-out downturn, as it will help us know when it’s “done” (i.e. when the green line comes down and the read line surges).

It also adds a bit of a cross-check to the chart above, as it showed the relative surge of assets in longs vs shorts as greed became the dominant mood.

Thanks for reading!

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Lastly, be sure to reach out at any time if I can help with anything. I promise to leave no questions unanswered and no problems unsolved.

—

Best wishes,
Callum Thomas

Founder/Editor of The Weekly ChartStorm
and Head of Research at Topdown Charts

Connect: LinkedIn | Twitter/X | Substack

VIDEO: update on KOSPI Crash [+Case Study]

This video provides a timely update on the Korean stockmarket following a -40% crash. I provide context as to what's going on (and why) + a worked example on how I approach markets (research framework).

View the Presentation: KOSPI Crash

n.b. Already a paid subscriber to The Weekly ChartStorm?

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Learnings and conclusions from this week’s charts:

• Mag-7, the 493, cap + equal-weighted S&P500 have all peaked.

• Market messiness is coming right on schedule (seasonally speaking).

• Retail trading behavior is consistent with the hints of regime change.

• Fed rate hike risk echoes global trends, and may weight further on stocks.

• The backdrop of expensive valuations and low cash allocations is not ideal.

Overall, there has been a distinct change in tone this past week in markets, the flare-up in geopolitics is making markets wary along with rising rates and AI/capex concerns. Maybe it is passing turbulence, but this week I explore some of the issues to keep front of mind on the risk front so we don’t get blindsided.

1. Peak to Peak: the “Lag-7” have come under renewed pressure after putting in a lower high (n.b. if they take out the 25 June low, that will make it a lower high and a lower low; which is the technical definition of a downtrend, so for MAGS; $61 is the key trigger level). Meanwhile the “S&P 493” has now also peaked…

Source:  MarketCharts.com

2. Equally Peaking: looking at the S&P500 itself, in both equal-weighted and cap-weighted terms it is looking a little messier. Breadth has also peaked for now at the same level it peaked at the last two times, so it is starting to have the look and feel of what might end up being a larger correction/consolidation phase.

Source: MarketCharts.com

3. Volatility Season: and seasonally speaking it is right on time. There is a seasonal tendency for volatility to rise this time of the year. Beyond the stats, there are a few boogeymen out there (e.g. Iran/regional war risk, US mid-terms, prospective Fed rate hikes, oil and inflation risks, AI doubts and bubble-deflation risk, trade war echoes, rising global bond yields).

Source:  Topdown Charts (cross-asset seasonality study)

4. Vibe Shift: retail already got the message, the levels of retail speculative enthusiasm as proxied by flows have tapered off significantly from last year. I suspect leveraged accounts combined with losses in crypto, precious metals, and (more recently) semis have sapped enthusiasm and buying power.

Read more

Learnings and conclusions from this week’s charts:

• The cap-weighted S&P500 is being held back by semis.

• The equal-weighted is looking good, and breadth is trending up.

• The unwind in Semis and Korean equities looks bubble-bursty.

• Margin debt growth and seasonality are waving risk flags.

• Relative value indicators are also presenting an omen.

Overall, it’s a bit of a conflicting picture at the moment. On the one hand “the market of stocks” is looking great; the equal-weighted index is trending up and breadth is improving. On the other hand, semiconductors look like they’re heading into freefall, and a number of other risk flags are waving. For now these two observations can exist alongside each other, but probably one will end up speaking loudest…

1. Tale of Two Indexes: the market cap-weighted S&P500 is a mess, it peaked early-June and has been stuck below overhead resistance ever since. The equal-weighted S&P500 however has been largely onwards and upwards —which echoes the solid uptrend in 200-day moving average breadth we’ve seen.

Source:  MarketCharts.com

2. Semis Selloff: the key weak spot for the market cap weighted index is semiconductors. After rising to become close to a 5th of total market cap, and staging a 4x+ rally during the AI boom/bubble, and basically being the main driver of the market… semis have come under considerable selling pressure in recent weeks.

Source:  MarketCharts.com

3. Bubble Watch — Semiconductor Stocks: the problem is things had started to become very much bubble-adjacent. So when you see the type of price action in the chart above, and how speculative things had become, it does make you think the risk of deeper downside is a real possibility. As I‘ve said before, bubbles are dangerous for bulls and bears: bears can get left behind as the market runs further and faster than expected, but likewise bulls can overstay their welcome and be left scratching their heads as the market turns faster and furious than expected.

Source: Topdown Charts

4. Korean Crash: especially when you see the Korean stock bubble starting to unwind (half of the Korean stockmarket is comprised of a couple of large chip stocks). As I’ve said before, there is of course some truth in the bull story for AI/chips — these things always start with good reason (but they end when things become unreasonable). This is Boom and Bust 101.

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Learnings and conclusions from this week’s charts:

• Speculative trading in leveraged ETFs has surged.

• Investors are increasingly all-in on stocks (portfolio allocations).

• The Fed is becoming more hawkish (echoing global pivot to rate hikes).

• July-Oct tends to be a more volatile time of the year (historical averages).

• A long-term trend change is underway in US vs Global relative performance.

Overall, a number of risk flags are starting to wave (both on the shorter-term/tactical and bigger-picture/longer-term horizons) as we head towards what has historically been a more volatile time of the year.

1. Leveraged ETF Trading: after the healthy correction of Q1 and subsequent confidence boosting buy-the-dip rebound of Q2, speculative trading has surged. As such, the leveraged ETF long vs short ratio is now in warning territory.

Source:  Topdown Charts Professional

2. Allocations vs Sentiment: but here’s where sentiment and positioning get interesting, while investor portfolio allocations to stocks are hovering around record highs (i.e. what they are doing), surveyed sentiment is only mildly bullish (i.e. what they are saying). I would say actions speak louder than words here, and the actions say investors are basically already all-in.

3. Fed Hawk Rising:  as for potential risk catalysts, the Fed appears to have drifted firmly toward the hawkish side (and to be fair that is where the data, which Warsh says he is going to be more dependent on, is pointing). And it is already the global direction of travel, with rate hikes dominating vs cuts across the central banks I monitor.

Source:  @LizThomasStrat

4. Tis the Season for Volatility: historical seasonal patterns point to higher volatility in the coming months, and I would have to say the sentiment/positioning and potential macro catalysts sure seem to line up with that.

Source:  @itmrandy

5. Household Asset Allocation: as a point to ponder, the average household now holds more of their wealth in equities than real estate. This leaves us in an interesting situation where the next major market meltdown could have real economy impacts through negative wealth effects (and confidence) …and the next major market downturn probably only happens when the economy rolls over or a crisis precipitates (so it becomes a bit of a negative-spiral flash point risk).

Source:  @TheStalwart

6. Bubble Vision: one clue that you’re in a major bubble is prices going up 10x in real terms. For global semiconductor stocks they’ve already leaped that hurdle. Similar to some of the other warning signs we’re seeing like expensive valuations and record high allocations, this is not a tactical risk flag, but it tells us a lot about the forward-looking risk setup, and that we should be thinking about downside protection and how to spot (+what to do about) the downside when it comes.

Source: @BudaghyanArthur

7. US vs Global Stocks: moving on, one very interesting development is the apparent persistence in global outperforming US since the turning point in 2025, this represents a major trend change, as Willie notes: “The secular trend in favor of the US that emerged coming out of the Financial Crisis has been broken.”

Source:  Willie Delwiche

8. Brazilian Breakout: on the global front, this one caught my eye; after a period of correction and consolidation Brazil looks to be attempting a breakout.

Source:  @davevermilion

9. Philippine Deep Value: and another intriguing chart, Philippine stocks are trading on record low forward PE valuations.

Source:  @MikeFritzell

10. Time to 1 Million: this table shows how long it takes to get between each 100k increment step on the journey to $1million (assuming $10k invested each year with 7% interest) — thanks to compounding, most of the work and time is spent in the early stages: e.g. “the first 300K is 50% of the way to a millionaire”.

Source:  @Investmentkage via @DividendGrowth

Thanks for reading, I appreciate your support! Please like/share/comment.

Portfolio Strategy Notes — Unsafe Investing

Echoing on the allocations theme, it’s interesting to note how investor allocations to cash and bonds are right at the bottom end of the historical range. And even within equities, the market cap weighting of defensive stocks is also at record lows.

In other words, the typical investor has a much lower portfolio weighting than usual to safe/defensive assets.

This is exactly what you would expect to see in the later stages of a raging bull market in equities, and to be fair it has (so far) made more sense to hold more equities (and more growthy/risky equities).

But naturally this leaves investors unprepared and ill-positioned for the next stage of the cycle. A bubble-burst or garden variety bear market will do more damage than usual to portfolios and investor wealth levels given the much greater exposure to growth assets and much smaller weighting than usual to defensive assets.

So again, I think it will pay to have a good ponder on process and plans around this.

—

Best wishes,
Callum Thomas

Founder & Editor of The Weekly ChartStorm
and Head of Research at Topdown Charts

Twitter/X: https://twitter.com/Callum_Thomas
LinkedIn: https://www.linkedin.com/in/callum-thomas-4990063/

In case you missed it, also see last week’s edition:

The Weekly ChartStorm

Hand picked charts and insights to help you Save Time, uncover Opportunities, and stay on top of the Stockmarket Outlook

By Callum Thomas

.

I sent a survey around yesterday asking what people think will be the biggest surprise for investors in H2 —and so far the top-voted candidate is “AI Bubble Burst”.

Looking at some of the recent price action (e.g. the KOSPI is down -20% off the peak, the US SOX putting in a major topping pattern, Japan’s Softbank down -33%), I think they might be onto something.

Which brings us to this week’s chart.

It’s an update of the US Semiconductors market cap weight chart, which has pulled back from record highs.

When I last featured this chart I mused: “semiconductors are in the bubble phase of the bull market (which is dangerous for both bulls and bears alike!)”

That remains true, and the danger is that we are in the early stages of a bubble burst (they start with initial weakness; slowly at first, and then all of a sudden).

But at the same time, in the past 2 years we have seen 2 periods of pullbacks which basically turned out to be “bull flags” (is this third time’s a charm?).

I would say it’s a timely juncture to review risk management plans and investment process, because at some point the old pattern of buy the dip will be faced with ever deeper dips…

Bottom line: AI bubble bursting risk is elevated; monitoring the situation.

p.s. yes —I will be digging deeper and updating on this chart/issue in future editions of The Weekly ChartStorm, so stay tuned!

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Global Bubbles — KOSPI

Korean equities are one key example of the global proliferation of AI bubblets.

Valuations have surged to record highs (as shown below), and meanwhile inflation risk is in alert mode in South Korea (general inflation was already trending up, and now PPI inflation + property price growth are surging); a pivot to rate hikes by the BOK (16th July) likely only piles on to the initial weakness we’ve seen in the KOSPI (alongside any doubts or idiosyncratic issues owing to AI).

A steeper correction in Korean stocks would likely rattle all of global equities, and logically spillover to emerging markets and US tech stocks. So it is one of the key risks I’m monitoring over at Topdown Charts.

Thanks for reading!

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Lastly, be sure to reach out at any time if I can help with anything. I promise to leave no questions unanswered and no problems unsolved.

—

Best wishes,
Callum Thomas

Founder & Editor of The Weekly ChartStorm
and Head of Research at Topdown Charts

Twitter/X: https://twitter.com/Callum_Thomas
LinkedIn: https://www.linkedin.com/in/callum-thomas-4990063/

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Learnings and conclusions from this week’s charts:

• The equal-weighted S&P500 continues to make new highs.

• The cap-weighted S&P500 remains stuck (thanks to “lag-7”).

• The S&P500 Value index also chalked up new highs last week.

• Micro caps and financials are putting in promising price action.

• The USA, Korea, and China have one bubbly thing in common.

Overall, the bull-market-broadening and bullish rotation theme continues to play through, with the old leaders lagging, and everything else starting pick up. This is a constructive development, but there are a few things to keep an eye on…

ICYMI: 10 Charts to Watch in 2026 [Half-Time Update]

1. Bull Market Broadening: the bullish broadening theme continues to play out. Below you can see the SPXEW (equal-weighted S&P500) making a strong push higher, while the cap-weighted S&P500 is still stuck in consolidation mode. Meanwhile 200-day moving average breadth continues to trend higher.

Source:  MarketCharts.com

2. Lag-7: meanwhile the Mag-7 continue to lag behind vs the S&P493.

Source:  MarketCharts.com

3. Equal vs Cap Weight: the equal vs cap weighted S&P500 relative performance line sure is looking like it’s attempting to put a bottom in. This is a positive sign for the bullish rotation theme.

(however: coming from such a one-sided market, the risk is you get a situation like 2000 where equal-weight outperforms by falling less when the previous leaders come unstuck; i.e. a bearish rotation)

Source: 

4. Value vs Growth: there are also (albeit less convincing) signs that the value vs growth relative performance line is also attempting to turn.

Source: Topdown Charts

5. Value ATH: and on that note, the S&P500 Value index just quietly made a new all-time high last week (whereas the S&P500 Growth index peaked a month ago).

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