{"id":24537,"date":"2025-07-17T07:30:00","date_gmt":"2025-07-17T11:30:00","guid":{"rendered":"https:\/\/jeffclarktrader.com\/market-minute\/?p=24537"},"modified":"2025-07-16T16:36:05","modified_gmt":"2025-07-16T20:36:05","slug":"this-rally-may-be-living-on-borrowed-time","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/this-rally-may-be-living-on-borrowed-time\/","title":{"rendered":"This Rally May Be Living on Borrowed Time"},"content":{"rendered":"\n
\n

Managing Editor\u2019s Note: <\/strong>Today, we\u2019re hearing from our contributing editor Mike Burnick in his weekly Thursday feature.<\/p>\n

Mike has over 30 years in the investment and financial services industry \u2013 from operating as a stockbroker, trader, and research analyst, to running a mutual fund as a registered investment advisor and portfolio manager, to being Research Director for the Sovereign Society, specializing in global ETF and options investing.<\/p>\n

And he\u2019s been senior analyst at TradeSmith for three years, running Constant Cash Flow, Infinite Income Loop, <\/em>and Inside TradeSmith<\/em>.<\/p>\n

Here\u2019s Mike\u2026<\/p>\n<\/div>\n\n\n\n

This Rally May Be Living on Borrowed Time<\/h2>\n\n\n\n

BY MIKE BURNICK, CONTRIBUTING EDITOR, MARKET MINUTE<\/em><\/strong><\/p>\n\n\n\n

Stocks have enjoyed one heck of a rally since the April tariff turmoil lows, but several sentiment indicators we follow closely tell me that this rally may be living on borrowed time\u2026.<\/p>\n\n\n\n

Remember, sentiment indicators are read as \u201ccontrary\u201d indicators. For example, when there are too many bulls\u2026 that\u2019s bearish for stocks, and vice versa.<\/p>\n\n\n\n

And on that note, you can see below that stock market greed<\/em> has returned with a vengeance.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Our Fear & Greed Index is back to an Extreme Greed<\/em> reading at 83. That\u2019s the highest reading in over a year and among the highest levels in recent years.<\/p>\n\n\n\n

From a contrarian perspective, this is bad news, because such high greed readings in the past often lead to stock market corrections.<\/p>\n\n\n\n

Greed is not always<\/u><\/em> good!<\/p>\n\n\n\n

But it\u2019s not only retail investors that are head-over-heels in love with the TACO<\/em> trade. Wall Street pros are all-in<\/em> on the bullish bandwagon, too.<\/p>\n\n\n\n

Data from the National Association of Active Investment Managers (MAAIM) shows the highest level of allocation to stocks among Wall Street pros in more than a year, as shown below.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Once again, this has been a reliable contrary indicator in the past.<\/p>\n\n\n\n

You can see for yourself that high NAAIM readings (lower panel) have lined up with peaks in the S&P 500 Index (top panel).<\/p>\n\n\n\n

Okay\u2026 so sentiment is stretched near a bullish extreme. But what will be the catalyst to trigger a reversal for stocks?<\/p>\n\n\n\n

While it could be almost anything unexpected, our in-house TradeSmith Seasonality indicators are forecasting a reversal of fortune for stocks could be dead ahead.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

July is so far living up to its typically bullish seasonality profile. But data on market seasonality says to expect a reversal to a bearish timing trend in just a few weeks.<\/p>\n\n\n\n

Seasonality for the S&P 500 during post-election years since 1953 takes a bearish turn from August 1 to the end of September. During this time frame, the S&P has declined -2.61% on average and is down 55.56% of the time in post-election years.<\/p>\n\n\n\n

Mike Burnick\u2019s Bottom line<\/em><\/strong>: I certainly hope you\u2019ve enjoyed and profited from the stock market surge since April. Enjoy it while it lasts, because a less favorable seasonal period is just ahead. Plus, reliable contrary sentiment indicators are signaling trouble ahead, too. And that\u2019s a recipe for a likely market correction. The good news is that seasonality turns positive again in October, so any pullback should be a good buying opportunity.<\/p>\n\n\n\n\n

Good investing,<\/p>\n

\"Signature\"<\/p>\n

Mike Burnick
\nContributing Editor, Market Minute<\/em><\/p>","protected":false},"excerpt":{"rendered":"

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