Micron put up astronomical earnings and the pre-market responded with a big fat meh. So what gives? The simple expectation is that a report like that would send the stock on a tear, and that still may play out through the day. But the odor of something bigger at play is drifting around.

We have started to see more and more analysts calling for the market to reset before the end of the year. Joe Duffy put up his thoughts here and then Blane Markham offered a deep dive in a recent market review here.

There is a consistent theme from everyone who has the current market under a microscope and here are some common signs to keep an eye on.

Market Breadth–For most of the year a disproportionate amount of the overall market growth has come from a small number of stocks, mainly related to the AI boom. The response to the Micron earnings today could be a bellwether as we look for the tipping point where Wall Street decides AI can’t support its massive debt and starts to unload these headline darling tickers.

Catalyst–Trying to guess at what this will be is simply a fools game but it will become obvious in short order. In bubbles like this one of the key assumptions that investors believe is bullet proof shows its heel and the house of cards begins to tumble. The massive debt is a likely suspect as is the massive amount of energy to support the frivolous use of AI. But it could be something that hasn’t even been considered yet.

Hedging–Keep a close eye on how traders are hedging against an potential implosion. Indicators like Put Call Ratios can often be a sign that fear is growing. Like the ability that weighted headline indexes have to hide what is churning beneath the surface, big money traders will use options to protect against a potential market turn. While they may still be holding and even buying stocks (keeping that headline index looking fat) their options positions will reveal what they expect in the future.

In all fairness, this market has been top heavy for a while. But with many people smarter than me showing concern, it gets my attention.

Keep learning and trade wisely,

John Boyer

Editor

Market Wealth Daily

Start pulling in more than a part time job. In about 5-10 min a day you can make more than most sidehustles. Click here to check it out for just $1.