Retail buying created the bottom of the market’s slide in April. Smart money was absent, as nothing had been finalized regarding tariffs. Still, nothing is concrete! But we do have a framework that can be applied to forecasts. Several things have remained constant. Earnings growth has remained strong, the consumer is still spending, wage growth continues at a strong pace, and unemployment remains low. BUT tariff data will begin in earnest next month. Earnings growth for the year has just been reset by my major houses to 7% (I predicted that in March), and companies lowering earnings have hit the pandemic level. (around 38% lowered earnings). This provides great reasons for institutional investors to take money off the table and invest later. I don’t believe the retail buyer can power this market higher. The catalyst for bad news outweighs the catalyst for good news in the short term. Yes, I believe the bull market will return! But not until the Federal Reserve sends clear signals that it plans on lowering interest rates. Which I anticipate will happen in September (I said that also in March).
Below is the same analysis I ran yesterday, only it shows that the chances of this being a short-term top have increased.
S&P 500 SHORT-TERM TOP ANALYSIS: JUNE 12, 2025
Current Market Data (Cross-Referenced)
- S&P 500 Level
- June 10: 6,022.24
- June 11: ~6,045 (closed up 0.38%)
- Peak: 6,147.43 (February 19)
- YTD Performance: Up ~2%
VOLUME ANALYSIS
Looking at the data
- Volume on U.S. exchanges was relatively light, with 14.5 billion shares traded, compared to an average of 17.8 billion shares over the previous 20 sessions (June 6).
- Recent sessions have shown LIGHT VOLUME during rallies—this is BEARISH.
APPLYING MY FRAMEWORK
1. PRICE ACTION & CANDLESTICK PATTERNS
- Double Top Pattern: February high at 6,147 not exceeded.
- Current Range: Between 5,830 support and 6,120 resistance.
- Stalling Action: Price struggling below 6,120 resistance.
2. VOLUME—DISTRIBUTION CONFIRMED
- Light Volume on Rallies: relatively light, with 14.5 billion shares traded, compared to an average of 17.8 billion.
- Volume Divergence: Price up, volume down = CLASSIC TOPPING SIGNAL.
- Distribution Pattern: Institutions selling into strength on light volume.
3. MOMENTUM OSCILLATORS
RSI – BEARISH DIVERGENCE
- RSI is above 70 after a good price increase over the past weeks.
- RSI diverges negatively against the price, which indicates danger of a reaction downwards.
MACD
- Currently bullish, BUT showing signs of weakening momentum.
4. MOVING AVERAGES
- S&P is above 50- and 200-day MAs currently.
- But individual stocks break down, closing below both the 50- and 200-day moving averages (Tesla example).
5. BREADTH INDICATORS—SEVERE DETERIORATION
Advance-Decline Line
- The advance-decline line, a measure of market breadth, has been falling since the end of May as the S&P 500 has soared to new heights.
- Midcap and small-cap A-D lines have already broken below their January lows.
% Above Moving Averages
- The percentage of S&P 500 stocks above their 200-day moving average…has dropped below the crucial 50% level.
6. PUT/CALL RATIO & SENTIMENT
- SPX P/C: 1.21 (neutral)
- Equity P/C: 0.66 (bullish complacency)
- VIX: 17.26 (extreme complacency)
7. FIBONACCI/RESISTANCE
- Stalling at 6,120 resistances (near February highs).
- Failed to break through despite multiple attempts.
DEFENSIVE POSITIONING EVIDENCE
Sector Rotation—MASSIVE RED FLAG
- SPY’s year-to-date return is -1.6%, while XLV, XLP, and XLU are up 7.7%, 4.4%, and 3.1%, respectively.
- Investors rotate away from high-risk cyclical sectors like technology and consumer discretionary.
Smart Money Indicators
- Tech underperformance.
- High-beta stocks are struggling.
- Defensive sectors leading = late-cycle behavior.
DISTRIBUTION vs ACCUMULATION EVIDENCE
Clear Distribution Patterns
- Light volume on rallies.
- Heavy volume on individual stock declines.
- Breadth deteriorates while the index rises.
- Leaders are breaking down technically.
- Defensive rotation.
FINAL VERDICT: YES, SHORT-TERM TOP
Why This Conclusion (Cross-Referenced)
- Price: Failed at 6,120 resistance, can’t exceed February highs.
- Volume: LIGHT on rallies = distribution, not accumulation.
- Breadth: A/D line falling since May while price rises.
- Momentum: RSI > 70 with negative divergence.
- Sentiment: Extreme complacency (VIX 17, P/C 0.66).
- Rotation: Clear defensive positioning by institutions.
Key Levels
- Resistance: 6,120-6,147
- Critical Support: 5,830
- Initial Target: 5,400-5,600
- Deeper Target: 5,000-5,200
Probability: 80-85% chance of short-term top
The market is displaying ALL the classic topping characteristics based upon the above framework. Light volume on rallies confirms distribution, not accumulation. Institutions are clearly rotating defensively while retail remains complacent.
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