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Current market timer: Bearish
This week we finally had a major breakdown in the Magnificent 7, which had previously been buttressing the S&P500 and Nasdaq. The generals are last to get shot, so to speak, and this is a bad omen for the broader indexes.
We sold a large portion of our portfolio to cash two weeks ago once we identified a topping pattern in SPX and QQQ. Whether there is further to fall depends on how the non-AI stocks react to recent developments.
If breadth starts to deteriorate and defensive sectors break their uptrends, then weāre in for a deeper selloff.
The worst case scenario would be a broad-based liquidation and reset of economic growth expectations.
Letās dive into how weāre seeing the market at this junctureā¦
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