2024-07-09 09:00:49 ET
Summary
- With fewer and fewer stocks leading the stock market higher and higher, market concentration has reached extreme levels - last observed during the Great Depression.
- In an indication of macroeconomic weakness, small-caps and cyclical sectors are not participating in the ongoing bull run, and poor market breadth signals classic late-cycle behavior.
- Given that mega-cap tech stocks make up more than half of QQQ ETF, a mean reversion trade propelled by an impending earnings slowdown could cause havoc in QQQ.
- QQQ's troublesome technical setup, extreme concentration, and lofty valuations support the idea of an impulsive (long, deep) pullback.
Introduction
With market concentration reaching levels last seen during the Great Depression [1929-1932] and equity valuations sitting at historically elevated levels [S&P 500 ( SPX ) Shiller PE ratio: 36.2x], I think it is imprudent for long-term investors to dismiss the idea of a "Concentration" bubble in the stock market....
Read the full article on Seeking Alpha
For further details see:
QQQ: Beware The Concentration Bubble