Red Flags Emerge

Detailed analysis below...

Last week was an especially challenging one for US stocks culminated by (1) a large momentum stock drawdown in high flyers, (2) WMT disappointing on earnings; and (3) poor economic data.

Goldman’s 12M Winners (Long Momentum Basket) traded down -8.6% on the week as retail investor favorites like PLTR, HIMS, RKLB, etc. got crushed. Speaking of retail investors, the euphoria we have seen in that cohort of the market should be viewed as an obvious red flag. 2 weeks ago, we witnessed the largest weekly retail investor buying on record.

The retail trader buying chart above shows that the previous high was early 2022, which was a major market top before a -25% SPX decline.

Moreover, the top 3 largest retail investor buying days in history all came in the last 20 days.