So here’s the deal: the stock market just did that thing where it breaks through a key level and basically waves a red flag saying “hey, maybe take some profits.” According to Jonathan Krinsky, the chief market technician at BTIG (yes, that’s a real job title), the S&P 500 is probably headed for a 5% pullback. Fun times!
Here’s what happened: The S&P 500 broke through what traders call a “resistance level” around 6,100. Think of resistance like that friend who always says “maybe we shouldn’t” when you’re about to make a questionable decision. When you finally ignore them and do the thing anyway, sometimes you end up regretting it.
Back in January, the S&P hit this 6,100 level and basically bounced off it like a rubber ball. Then Trump announced his tariff plans, and stocks took a 20% nosedive through April. Classic. But by late June, the market had recovered and pushed past 6,100 again. Now Krinsky thinks we’re due for a “retest” of that level – market speak for “we’re probably going back down there to see if it holds.”
Why the market might be getting wobbly:
1. Consumers are tapping out
Consumer discretionary stocks (basically anything people buy when they’re feeling fancy) are down 0.43% this year. When people stop buying stuff they don’t need, that’s usually not great for the economy. Shocking, I know.
2. Chip stocks might be losing their mojo
Semiconductor stocks historically underperform software stocks in late summer. It’s like how pumpkin spice lattes don’t hit the same in July – timing matters. Plus, some recent earnings from chip companies have been… meh. AMD and Super Micro both missed expectations, which is never fun.
3. Credit spreads could widen
This sounds boring but it’s actually important. Credit spreads measure how much extra yield investors demand to hold corporate bonds versus safe government bonds. Right now they’re super tight (around 2.95%), meaning investors aren’t worried about companies defaulting. But if that changes and spreads widen, it usually means trouble for stocks.
4. Even the tech giants aren’t exciting people
Microsoft and Meta just reported “blowout” earnings, but investors basically shrugged. When even great news doesn’t move the needle, that’s often a sign that expectations have gotten a bit too frothy.
Now, before you start panic-selling everything, remember that a 5% pullback is pretty normal. It’s like market maintenance – annoying but necessary. Krinsky thinks if we do drop to around 6,100, that could actually be a decent buying opportunity.
The key thing to watch is Nvidia’s earnings at the end of August. Because let’s be honest, in this market, when Nvidia sneezes, everyone catches a cold. If they deliver another monster quarter, this whole “sell-off” prediction might age like milk.
Bottom line: The market is sending some warning signals, but it’s not time to hide under your desk just yet. Maybe just don’t bet the farm on stocks continuing to go straight up forever. Revolutionary thinking, right?