S&P 500 Hits Record Highs? More Like Mildly Concerning Highs, Says This Totally-Not-Boring Analysis

Rocketing... or Fizzling?

Alright folks so the S&P 500 hit new highs. Big deal! It's like saying you finally parallel parked without hitting anything – good for you but don't expect a medal. Oppenheimer's Ari Wald is poking around under the hood and what he's seeing isn't exactly 'full thrust.' Apparently when the S&P 500 makes new highs but fewer than 100 stocks on the NYSE are also hitting highs the returns get a bit…meh. It's like promising Mars and delivering… Milton Keynes. Slightly disappointing right?

Divergence? More Like Convergence...Eventually

Wald says there's a 'fine line between a top and a breakout.' It's like the difference between a perfectly executed Falcon Heavy landing and... well a not so perfect one. He's worried that the strength of the big companies is hiding weakness elsewhere. Which let's be honest is pretty much the story of my life (kidding! Mostly...). But fear not! He's not saying the sky is falling. Just that we should keep an eye on things. Maybe invest in a good telescope.

Small Caps to the Rescue!

Now here's where it gets interesting. Wald points out that the Russell 2000 (the small caps index) is doing pretty well. He says 'As Go Small Caps So Goes the Cycle.' Which sounds like something Yoda would say after a few too many Jawa juices. If the Russell 2000 can stay above its 200 day moving average (that's 2,175 for those of you playing at home) then the rally can broaden out. It's like the small engines that could…if they don't run out of fuel.

Warning Signs? More Like Gentle Nudges

But (there's always a 'but,' isn't there?) if the Russell 2000 fails to hold that 200 day moving average then we might be looking at a market top. Which let's face it would be a bit of a bummer. Wald says the S&P 500 has support at 6,147 and then at 6,030. The broader index's 200 day moving average is at 5,840. The Russell's 200 day average sits at 2,176.11. Got all that? Good. Now go back and read it again.

Monday Blues (and Market Dips)

Of course because the universe has a sense of humor stocks fell on Monday. The Dow Jones Industrial Average dropped 300 points the S&P 500 slid 0.6% and the Nasdaq Composite lost 0.7%. Probably just a delayed reaction to everyone realizing that 'macroeconomic uncertainty' is just a fancy way of saying 'we have no idea what's going to happen.' It's like trying to predict the trajectory of a Falcon Heavy landing... in a hurricane. Fun times!

So What's the Takeaway? To the Moon...Cautiously

Look the market is like a rocket ship. Sometimes it soars sometimes it sputters and sometimes it just sits on the launchpad waiting for better weather. Wald's just saying that we should keep an eye on the instruments and be prepared to adjust our trajectory. In other words diversify hedge and maybe buy a flamethrower… just in case. After all as I always say 'I could either watch it happen or be part of it.' And I'd rather be part of it even if it means wearing a spacesuit and carrying a fire extinguisher.