Has the Market Peaked?

It’s too early to know for certain, but Wednesday’s reversal in the S&P 500 sure looks to me like the action we typically get at an intermediate-term top.

The index traded as high as 6965 – up comfortably on the session and at a new high. Then, just after noon, the S&P started to drift lower. The selling pressure accelerated in the final hour, and the S&P closed at the low of the day 6920 – down 23 points.

Of course, no one is going to declare confidently “That’s it. The stock market has peaked,” when the S&P is trading just 23 points below its highest closing price ever. But, if the index is following the road map from early 2025, right now is about the timeframe the S&P should be peaking.

Here’s an updated look at the chart…

The setup does look eerily similar to what occurred just before the “tariff tantrum” last year. It would be somewhat amusing – at least for those of us with a warped appreciation for irony – if the Supreme Court’s ruling on the legality of the tariffs, which is supposed to come any day, sparks another tantrum.

In any case…

We’ve noted over the past few weeks that the setup in the VIX and the pricing structure of the VIX options suggest caution. We can argue that same point today. VIX calls continue to be priced much higher than VIX puts. And the VIX itself did generate a broad stock market sell signal last week.

The daily technical indicators have NOT, however, stretched into extremely overbought territory. The best they could muster was a case of “mildly overbought.”

It won’t take much to use up whatever fuel is available for a decline and push the indicators into oversold territory. So, we probably should not be looking for a catastrophic decline (yet).

But, given the level of investor enthusiasm, even a mild drop of 5% from here could sure feel like a catastrophe.

Best regards and good trading,

Jeff Clark
Editor, Market Minute