Polite Society Demands an RSVP to RSP

Many of you are likely aware, by now, of the market being on the cusp of its twelfth straight session of negative breadth on the S&P 500, meaning more declining than advancing underlying issues in the S&P. The fact that this is happening during the holiday season has many taken aback. 

However, given the extreme bifurcation, with names like AAPL AVGO PLTR TSLA, among a few others, being chased up nearly every day, it has clearly masked the underlying weakness in most parts of the market. 

That said, the RSP, which is the S&P 500 Equal Weight ETF, seen below on the daily chart, clearly illustrates a more comprehensive picture of the market without the extreme weightings of the Magnificent 7 names, for example. There is an open gap dating back to the election at $178.73. But beyond that this chart basically topped out right around Thanksgiving. 

We have been here before many times over in this market, with shockingly bearish divergences never really coming home to roost--And if they do, you might blink and miss another V-shape bottom back to new highs.

Hence, the complacency here is completely understandable, as equity allocations and sentiment are basically all-in long. 

Most housing sectors and stocks, as well as REITs, small caps, and many other sectors are deteriorating before our eyes despite the seasonally strong flows this time of year, and especially despite how ubiquitous the calls for a small cap-led rally have been. 

My take is that this is the last gasp of a bifurcated market which has had more lives than a cat, likely thanks to an easy Fed and a Treasury Secretary willing to print at all costs regardless of the bond market consequences to come. Tomorrow's "hawkish cut" at the FOMC may be enough for the market to recalibrate expectations into 2025 of a prolonged cutting cycle not coming to fruition, after all, which means multiples in the crowded hot names remain ridiculously elevated and need to come down.