The S&P 500 has surged back to all-time highs after months of consolidation.
And mainstream media is filled with euphoria again, pointing to AI advances, easing inflation, strong earnings, and Trump’s push for cheaper oil.
They’re declaring the bull market stronger than ever.
But something concerning is happening beneath the surface, and Wall Street might be about to pull one of its favorite tricks again.
While the S&P 500 makes new records, market participation is at troubling lows.
Only about 60% of S&P 500 stocks have been trending higher over the last 200 days – lower than any point in 2024.
This makes the current market technically weaker than any time in over a year.
Not what you want to see at all-time highs…
The deterioration in market breadth suggests growing weakness beneath the surface.
And we’ve seen this before.
In January 2022, the S&P 500 hit new highs with similarly weak participation.
What followed?
A 25% decline in the 2022 bear market.
Why This Time Might Be Different
While market breadth concerns us, we’re not expecting another prolonged bear market like 2022.
The Macro backdrop is significantly different:
- Inflation remains low as stimulus effects fade
- Fed likely to keep rates stable now
- Oil prices remain stable, unlike 2022’s surge before Ukraine’s war
It’s actually the perfect cocktail for continued market gains.
However, one short-term risk demands attention.
Ready to Profit From These Markets?
At Bravos Research, we’ve captured impressive gains in just the past weeks:
- Recently booked 19% profit on $GEV
- Secured 21% gain on $ANET
- Locked in 18% profit on $TLN
Want our complete market strategy?
Click here to try Bravos Research
The Bond Yield Threat
Rising government bond yields could trigger a market pullback.
Here’s why: Stocks and bonds historically comprise most U.S. investor portfolios.
When 10-year bond yields rise significantly, as they have recently, investors often reduce stock exposure in favor of guaranteed bond returns.
Consider a 10-year bond yielding 2% – not very attractive.
But when yields jump to 5%, that guaranteed return becomes much more attractive.
This can lead investors to increase their exposure to bonds and reduce their exposure to stocks.
That’s why stocks and bonds are so deeply interconnected.
Bond yields have been rising significantly over the last few months.
Not as extreme as in 2022, but enough to make investors reconsider their stock allocations.
The last few times bond yields spiked like this, stocks saw sharp corrections.
We think there’s still a risk of one more thrust higher in bond yields that could pressure the market in the short term.
Our Current Strategy
While we don’t have a crystal ball, our analysis of market breadth, bond yields, commodity prices, and economic data helps us increase the odds.
Today’s signals are flashing yellow.
We’re still holding long positions, but have reduced exposure by booking profits on recent winners.
Our portfolio now includes gold exposure for defensive positioning and select large cap tech stocks like Amazon and Alphabet that could weather corrections.
Building cash today provides buying power when the market corrects.
The key to success in trading is knowing when to get defensive and bet against popular narratives.
We’ll be ready to deploy capital when warning signals clear and ride the next leg higher.
🚨 Want Actionable Trades Ideas?
At Bravos Research, we’re delivering.
We’ve made some incredible trades in 2024:
- Average profit in 2024 = 16.61%
- Average loss in 2024 = 3.52%
We send buy and sell alerts on individual stocks, ETFs, commodities, and cryptos.
Get access to real-time Trade Alerts here
Subscribe to our YouTube for more in-depth analysis and Follow us on X for real-time market updates!
