I’m about to do something that I never enjoy. I’m an optimist, so I naturally have a bullish outlook not only on the stock market but in life. This week, I’m stepping out my comfort zone and showing you the most bearish charts I can find. This isn’t meant to scare you. But sometimes, we need to look at the glass as half empty instead of half full. I believe by doing this, you allow yourself to remove any internal biases, and see the full picture for what it is.

Seasonality

Historically, August & September tend to be the strongest months for volatility, and the worst months for stocks. Not to mention, this time of the year is historically weak during post election years. All of these factors, combined with the huge run off the April lows, equals for the possibility of a messy market over the next couple of months.

Failed Breakouts

I’m seeing failed breakouts left and right. The largest companies in the world, the MAG Seven $MAGS ( ▼ 0.26% ) , are coming off a failed breakout after stellar earnings reports from $MSFT ( ▼ 0.44% ) & $META ( ▲ 0.4% ) . The leader in crypto exchanges $COIN ( ▼ 2.26% ) , also had a nasty failed breakout following not so great earnings, and a Forbes cover with Robinhood’s CEO titled “Crypto’s Second Revolution.”

Yet To Breakout

The Dow Jones Industrial Average $DIA ( ▲ 0.14% ) , the Equal Weight S&P 500 $RSP ( ▼ 0.25% ) , and Homebuilders $XHB ( ▼ 0.28% ) (which aren’t even close), have all yet to break out to new all-time highs. Some view the Dow as the world’s most important stock index, while the equal-weighted S&P is widely seen as a barometer of market breadth. Homebuilders are important because they often reflect the health of the overall consumer. The fact that none of these have confirmed the broader market’s push to new highs, is an important divergence and cause for concern in my opinion.

Conclusion

I think the market is showing signs that it’s time to pump the brakes on the bull market party. This doesn’t mean the party is over, but we could be in for some sort of intermission, before things get back started. A positive sign is homebuilders being up during the broad market selloff on Friday. If we see these beaten down areas start to catch rotation, this could fuel the next leg higher. After all, “rotation is the lifeblood of a bull market.” What do you think about all of this? Feel free to reach out and let me know your thoughts. As always, thanks for reading and blessings to all!

Follow me on Twitter/X @TheDonInvesting