The Indexes Are Lying

I’ve learned over 30 years in the markets that some of the most dangerous corrections don’t start with the indexes collapsing.

They start underneath the surface.

This is what happens when institutional money quietly liquidates overextended momentum stocks while simultaneously rotating into boring defensive sectors, industrials, utilities and large-cap safety. The major indexes stay elevated, giving the impression that everything is fine, while individual positions get absolutely hollowed out.

The averages look healthy.

The portfolios do not.

That’s exactly what I believe is happening right now.

The correction, as I’ve predicted, is underway.

The correction had begun as I talked about in my market update here on Substack, but Just like I said, you got a little dead cat bounce from the SpaceX IPO, but ultimately that sucked liquidity out. Especially for space stocks. It burned that money now as it has dropped below the IPO. Why I sold RKLB at $121, after running with it from sub $5. There was something else propping up the market though, and we all know it, the President and his tech / wall street heavy admin. The carrot being dangled by the President with daily ceasefires, daily deals, daily headlines and daily “we’re close” nonsense is gone.

Where I see something switching is sentiment.

For months every dip was met with a ceasefire headline, a peace headline, a deal-is-close headline. Investors became conditioned to it.

But are people prepared for the inverse?

Are they prepared for ceasefires being broken instead of announced?

For negotiations failing instead of progressing?

For Iran not partaking?

For escalation replacing de-escalation?

Because that is what flips markets.

It’s been absolutely euphoric.

And if you’ve been like me and many others who are extremely bullish on America and equities, you should have made a lot of money. If not a lot, at least you should have participated.

But now the correction has arrived.

Yes, the indexes might still be near the highs, but anyone who knows anything about the stock market and breadth is seeing what’s really happening. Positions are already being absolutely destroyed. Some stocks are down over 50% already.

I’m not even going to get into Bitcoin and crypto equities. Those have been absolutely smashed, just like we talked about.

Now the only thing propping up this market is AI stocks and semiconductors, and even those are starting to see bad sentiment and structural breakdowns.

We’re already seeing the rotation.

As the Nasdaq and the Qs begin to wobble, the Dow is quietly making new all-time highs.

That isn’t random.

Money is moving.

The question isn’t whether rotation is happening.

The question is where that liquidity ultimately ends up.

As we move through the summer, I believe it gets deep, dark and red going into fall. A classic midterm cycle correction is in play.

My base case remains a normal 10-15% correction.

But the catalyst that could turn this from normal into something much deeper, maybe 20-25%, is Republicans losing the midterms and Democrats gaining power.

Because ultimately that would rock AI, data centers, energy and more. There would be no coming back from that narrative for a while.

And this is where it gets interesting.

That timing lines up almost perfectly with Bitcoin’s four-year cycle low around October.

So now you have a classic midterm correction, fears surrounding the election, AI and data center stocks repricing, and all of that liquidity looking for a new home.

If you believe in the store of value thesis and we go back to basics, I believe a lot of that money eventually finds its way into Bitcoin.

That, to me, is what can flip sentiment at the perfect four-year cycle low and bring upon the next green candle and the run to what I believe is ultimately north of $250,000.

But let me be clear.

I’m not bearish on equities.

I’m mega bullish.

I think after this correction the market begins to run again. The run of 2027-2028 will be one of the greatest we have ever witnessed.

We just don’t know yet what the next narrative will be because we need to see the election first.

So that’s my updated thesis.

As many of you know, I sold Rocket Lab, HUT, IREN and a lot of other stocks near or close to the highs. I’ve been in cash for a while now.

And before the haters come in, they know I’m right. They follow me.

Give or take 3-4% points, the thesis has been on the money.

I’m not gloating.

I’m not flexing.

I’m just sharing 30 years of experience. Just enjoy it while I’m still here.

It’s free, say thank you.