Weekly S&P500 ChartStorm - 17 May 2026
This week: the 7.5k ceiling, risk-watch, steam (momentum, margin debt, leveraged ETFs, semis, valuations), case for commodities, software stocks setup...
Welcome to the latest Weekly S&P500 #ChartStorm!
Learnings and conclusions from this week’s charts:
Roundnumberitis has hit the S&P500 with a stall at 7500.
Rates and inflation risk are the key candidate catalysts for a selloff.
Semis look overheated following a near-vertical run.
Retail has chased the rally with heavily leveraged bets.
The bull case would be for broadening/rotation (e.g. software?).
Overall, the market looks to be taking a breather at a technically convenient spot (equal-weighted S&P500 stalled at resistance, the cap-weighted rolling over from 7500). The easy answer seems to be a period of letting-off steam (and steam is a key theme this week).
1. Donk! The market hit its head on what appears to be the ceiling for now (7500 — p.s. don’t doubt the power of round numbers, AI might be the next big thing, but for now the market is ruled by us silly fallible humans and our monkey brains …and those round numbers matter immensely!)
In any case, it’s hard to keep a near-straight-line trajectory going in markets. The bull case is a consolidation or settling into a more choppy rise. The bear case would be the market takes a breather back to 7000 to let off some of the steam (see next few charts for documentation of said steam).
Source: MarketCharts.com Charting Tools
2. Rates & Inflation Risk: one more thing, for a market that looks technically ready to take a breather —the prime candidate excuse is probably rates and inflation risk (bond yields are on the rise). Also, geopolitics embers continue to smolder.
Source: @zerohedge
3. Steam — Momentum Melt-Up: the steam whistling noise is very loud on this one. Momentum stocks (dominated by semis) have basically had a vertical rally relative to minimum volatility stocks (think defensives like staples, utilities). Markets don’t like big straight-line moves like that, it’s not something that persists.
Source: @RealAlpineMacro via @SoberLook
4. Steam — Margin Trading: the steam is whistling loudly in retail trading accounts too, with margin debt balances at record highs in absolute terms and as a percentage of assets. It’s giving 2021 energy.
Source: @WallStJesus
5. Steam — Margin Debt Acceleration: as another angle on margin debt, I find you get good signals from the rate of change (as in this chart). On that note we are clearly in warning territory here (and p.s. yes, margin debt expansion is also very significant right now even if you adjust for market movements).
Source: Topdown Charts Professional
6. Steam — Single-Stock ETF Assets: another pot boiling over here, the total assets in leveraged single-stock ETFs (which in and of itself is a wild product to have) has surged almost 2x off the Q1 low. In the scheme of things, these are not large numbers ($40B vs S&P500 total market cap of a about 67 Trillion), but the interesting thing is what it represents; i.e. rising retail interest in leveraged speculation in an increasingly narrow list of names.
Source: @GlobalMktObserv
7. Steam — Speculative Leveraged ETF Trading: speaking of leverage and ETFs, this chart tracks the ratio of trading in leveraged long vs short US equity ETFs. Basically it traces the 2026 journey from Fear-to-FOMO in a flash.
Source: Topdown Charts Professional
8. Steam — Semis vs Software: in case it wasn’t obvious, the rebound-rally has been heavily centered on semis, and hence we have seen a surge of flows into semiconductor stocks (meanwhile software has seen the opposite). At this point semis are a heavily crowded trade, and are significantly overbought right now.
The bullish take would be that semis might be done for now (pause/plateau?), and we are on the cusp of a broadening out of the rally and maybe bullish rotation (could easily see flows rotating out of semis into software, particularly as software stocks have seen heavy shorting; short-squeeze ahead?).
Source: @BrianSozzi
9. Steam — Valuations: bigger picture, we are in a cyclically overheated market, the various valuation indicators say it’s expensive, and that does create a risk of rapid resets and valuation mean reversion.
But in the end, aside from freak crashes or crises, the thing that causes markets to go down in a sustained fashion (aka bear markets) is recession (earnings are the key driver of stock prices in the bigger scheme of things).
And for now there are no signs of recession. I’m keeping close tabs on that front though, so I will be sure to update as/when/if the facts change.
Source: Topdown Charts Professional
10. Commodities vs Stocks: I have long been an advocate of allocating to commodities as an asset class (or alternatively a basket of commodity stocks) both tactically (e.g. in 2022, 2026) and strategically —because they are a useful way of helping diversify/protect capital, and a source of alpha/returns.
This chart/study helps spell it out: “We find that commodity futures have earned an average annual risk premium of 5.4% over the risk-free rate and a premium over US inflation of more than 6% per annum. Commodity futures have outperformed equities in roughly 43% of years and in two out of every five decades, suggesting distinct return drivers and meaningful diversification benefits“
Source: An Index of Commodity Futures Returns Since 1871 via Snippet Finance
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Portfolio Strategy Notes — Software Sector Setup
As noted in my latest Topdown Charts report, the trend is still your friend for software stocks…
