The market just wrapped up one of the longest winning streaks in decades while breadth quietly deteriorated beneath the surface. We kept printing all-time highs even as more stocks declined than advanced—a negative divergence we haven’t seen structurally since 1996.
Furthermore, the massive 16% vertical run across April and May has only occurred four times in history. Three of those instances resolved into a recession or crisis; the fourth preceded Black Monday in 1987 by just a few months. This kind of divergence at major highs doesn’t show up often. When it does, it usually matters.
What I Was Watching Mid-Week
Early in the week, my focus was squarely on leadership concentration. Chips, AI, and memory have single-handedly carried the indices. The core question was whether this hyper-concentration would sustain or if we’d see a healthy, broad rotation. Closing the week positive would have marked 10 straight green weeks—an unprecedented streak.
Bond momentum was the second piece of the puzzle. The speed and velocity of the move in yields matters infinitely more than the nominal level itself. Yields don’t need to be at highs to signal trouble; a sudden, aggressive collapse can just as easily signal that something underneath has broken and capital is fleeing to safety. Right now, weakening breadth alongside new index highs feels like the real warning shot.
I also mapped a few specific inter-market correlations:
- IGV vs. Zillow: Software continues to heavily lead, but Zillow is real estate tech that is lagging behind and has not followed trends—it is acting like a classic lagger.
- KWEB vs. Software: Chinese tech is correlated with US software, though trailing on a lag. Look for signs of Chinese tech playing catch-up here.
- Metals vs. Chips: A tightly bound relationship between silver, copper, and semiconductor demand, though macro forces are keeping them at a crossroads.
How the Week Played Out
Thursday provided a clean blueprint of what a real rotation looks like. Banks ripped and healthcare posted its best stretch in a year, while semis held firm and both metals and Bitcoin sold off. Despite a high number of individual green tickers, the broad indices closed red. Crucially, money didn’t panic-rush into defensive volatility assets or bonds; it rotated methodically into financials and healthcare.
By Friday, the exhaustion was obvious. The historic 10-week green streak officially ended. Alphabet’s massive, record-breaking $85 billion equity offering was absorbed by the market, but the sheer size of the raise visibly sapped broad market steam. With SpaceX kicking off its massive $75 billion IPO roadshow ahead of its June 12th debut, we are seeing a structural shift: the market’s mega-generals are shifting from share buybacks to massive capital calls to fund the AI infrastructure war.
On the data front, non-farm payrolls came in hot. A massive chunk of those gains came directly from hospitality—a strong forward-looking indicator for consumer travel and leisure spending 3 to 6 months out.
Current Takeaways
1. The Core Regime
Leadership remains incredibly narrow. While mega-cap concentration keeps the indices afloat, the underlying foundation is fraying as laggards quietly break down. When the generals eventually roll over, the rest of the market historically follows them hard.
2. The Dollar as Gatekeeper
The US Dollar Index remains the ultimate macro conclusion. It ran on Friday, immediately crushing silver, gold, and Bitcoin further. If the dollar breaks out from here, it shuts down momentum across the entire board. If it stays contained, the equity experiment can extend.
3. Bitcoin at the Crossroad
Bitcoin is sitting at a critical structural junction tied to manufacturing data. Historically, ISM expansion gives Bitcoin room to run, while a roll back into contraction slams the window shut. ISM is technically still in its favor right now, but Bitcoin’s failure to launch alongside this expansion makes this entire cycle look like a deep anomaly.
4. The Policy Divergence
Strong jobs and sticky inflation are forcing a hard question: Are we actually setting up for a winter rate hike instead of a cut? While the administration has made it clear they want lower rates, that narrative completely clashes with hot employment, sticky inflation, and indices sitting near all-time highs. If a hike enters the chamber, the December-to-February FOMC window is the target.
Plays & Focus List
I am currently operating from a highly patient stance. Steam is leaving the engine, and steam is what fuels profitable short-term trades. I’d rather sit in cheap, asymmetric event plays or hold cash until clear momentum returns.
- Zillow (Z): Playing the software lagger thesis behind IGV. If software rotation holds, Z catches up late. Looking at the low-to-mid $40s for a July swing, or targeted August options strikes under $50.
- Netflix (NFLX): Another high-beta software lagger. Looking at July calls, keeping it conservative with strikes capped at $110 while waiting for macro rotation confirmation.
- Apple (AAPL): Quiet, overlooked rotation momentum here. It sold off Friday on broad index exhaustion, which creates a solid entry opportunity if capital broadens out away from chips.
- Intuit (INTU): A stellar long-term candidate. It’s sitting in a well-defined consolidation box. I am content to let it build a proper base here and look for entries on any further localized weakness.
- META (Event Play): A high-conviction “drop-and-pop” setup. The judge’s ruling on the social media addiction lawsuit drops sometime after the June 12th closing statements. A negative ruling won’t hit a jury, but it risks becoming their “Cigarette Moment”—opening up massive future liabilities. A legal loss could trigger a sharp, short-term panic drop, creating a massive buying opportunity for a bounce on an otherwise lagging mega-cap name.
- CBOE / CME (Bounce Play): The recent correction was a swift overreaction to the approval of perpetual futures. With traditional options volume printing all-time highs, this drop looks like structural exhaustion ripe for a bounce.
- S / CIBR (The Next Wave): LEAPs on SentinelOne could be a hitter. The quiet signing of federal AI security initiatives signals that the next massive wave of government spending is headed toward defensive AI layers. Watching for near-term pullbacks to layer in shorter-term tactical positions.
- SLV / CPER: The core debasement thesis remains fully intact based on expanding ISM manufacturing data and rising prices paid. Dollar strength is keeping a lid on metals for now, but any easing of the dollar’s grip will likely trigger an aggressive, explosive breakout. Watching August silver targets closely.
Current Stance
I am absolutely not chasing the current tech leaders at these levels. The system is visibly losing steam. Until we get the next major catalyst or a clean rotation into the laggards, patience is the single highest-EV position. With a massive macro gauntlet next week—May CPI and the Fed decision—forcing trades into a stretched, bifurcated market is a loser’s game. Let the market present the setup first.