Don here...
Brandon Chapman spent yesterday's session quantifying exactly how much value is being extracted from the broader market to fuel Nvidia's $1 trillion surge since July.
The numbers are stark. Let me walk you through his methodology.
He started with RSP versus SPY. RSP has been flat since July 28th. That's the equal weighted S&P doing nothing for three months. But SPY just tested fresh all-time highs this week.
Brandon then showed RSP priced in gold terms. We're at April lows. Extend that chart to five years and we're back at 2020 levels in real purchasing power.
The market hasn't gained value. It's just been redistributed.
In today's Live Trading Room session replay, you'll see:
- SPY/RSP ratio analysis showing worst breadth divergence in 20+ years of available data
- Only 50% of S&P components above 200-day MA, 45% above 100-day, 34% above 20-day at index highs
- Free cash flow yield calculations showing 45 years of gains pulled forward to present valuations
- Why skew at 141 with July trigger still signaling 5-10% correction overdue
Brandon's pairs ratio work was particularly revealing. The SPY to RSP spread has gone parabolic. We've had periods of concentration before, but nothing like the current dislocation that started accelerating in early 2024.
The sector rotation data confirms it. Over 12 weeks, three sectors are negative outright. Technology, communications, and healthcare are up because they contain the Mag Seven. Everything else is funding those gains.
He walked through the margin debt reality. Retail tapped out in July at record levels. We're not expanding credit to drive markets higher. This is pure reallocation from 493 names into 7.
The breadth indicators scream it. At fresh S&P highs, only 25% of stocks are above their 5-day moving average. That's not healthy distribution. That's concentration reaching extreme levels.
→ Watch Brandon's complete technical breakdown
Brandon's hedge construction using SPY puts makes sense in this environment. You're not betting on a crash. You're protecting against the mathematical reality that when 40% of index weight sits in seven names, any stumble there creates outsized downside.
The skew setup since July 23rd keeps resetting higher without the cleansing 5-10% pullback vol markets have been pricing. That pressure builds.
Eventually it releases.
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
Helping You Become a Better Trader...it’s What We Do. Experience TheoTrade® Today!
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