We Have Not Seen This Since June 2008…

Summary

In this detailed market analysis, Thomas Atinson covers the ongoing market rotation, with small caps outperforming large tech stocks, signaling potential opportunities in various sectors. He discusses earnings expectations for major players like Netflix and Intel, while cautioning about AI growth concerns and overbought conditions in silver and gold. The video highlights key trends in equities, options, and crypto, including the potential for volatility and risk as the midterm election year unfolds. With earnings season underway, Atinson emphasizes the importance of staying informed and monitoring sector movements, while balancing both opportunities and risks in a shifting market.

Takeaways

• 😀 Small-cap stocks have outperformed the Magnificent 7 (big tech stocks) and the S&P 500 in every trading session this year, signaling a shift in market focus.
• 😀 Earnings season will be crucial, with big tech companies like Netflix and Intel expected to influence market movements significantly.
• 😀 Options markets indicate expected large price swings in Netflix (7-12%) and Intel (up to 10%) based on their earnings results.
• 😀 There's potential for market volatility, with the possibility of a pullback after Martin Luther King Jr. Day, given the current overbought condition.
• 😀 The options market is showing large transactions in Netflix, indicating a possible shift in sentiment and positioning ahead of earnings.
• 😀 The Russell 2000 index has outperformed the S&P 500, signaling that small-cap stocks and sector rotations are currently the key to opportunities in the market.
• 😀 Silver has entered a volatile phase with extreme swings, creating both risk and opportunity in the precious metals market.
• 😀 Cryptocurrencies like Bitcoin and Ethereum are showing bullish trends, with Bitcoin potentially heading toward the 104-106k range.
• 😀 There is growing concern that large tech stocks (like the Magnificent 7) may not live up to earnings expectations, potentially signaling longer-term challenges for growth stocks.
• 😀 The US dollar remains in a consolidation phase, but a breakout above 101 could signal a period of strength for the greenback, affecting global markets.

Q & A

Why is the number 10 significant at the start of the video?

The number 10 refers to the fact that small-cap stocks have outperformed both the Magnificent 7 and the S&P 500 for 10 consecutive trading sessions, something that has not happened since June 2008.

What does the outperformance of small caps signal about the current market environment?

It signals a broad market rotation away from mega-cap tech toward smaller and mid-sized companies, suggesting improving market breadth and more widespread opportunities across sectors.

What is the Toy Barometer, and why is it important?

The Toy Barometer is a market indicator that analyzes performance from late December through January 19 to forecast the next 6–12 months. Historically, strong readings during this period tend to precede bullish markets over the following year.

How has market breadth changed since the Federal Reserve cut rates?

Market breadth has improved significantly since the rate cut, with more stocks trading above their 200-day moving averages and increased participation across sectors rather than just large-cap technology.

Why is valuation compression in big tech stocks important?

Valuation compression means that price-to-earnings multiples are declining even as earnings improve, which can create selective opportunities but also signals that growth expectations—especially around AI—may be moderating.

What concerns are being raised ahead of earnings season?

The main concerns are whether big tech companies like Netflix and Intel can meet high expectations, and whether disappointing earnings could accelerate weakness in the Magnificent 7.

What does options-implied volatility suggest for stocks like Netflix and Intel?

Options markets are pricing in large post-earnings moves, around 7–12% for Netflix and up to 10% for Intel, indicating heightened uncertainty and potential for sharp price swings.

What does the put-call ratio currently indicate about the market?

Low put-call ratios suggest complacency and have historically been followed by weaker market performance, indicating that near-term downside risk may be elevated.

Why is the bullish percent index noteworthy right now?

The bullish percent index shows the market is approaching overbought levels, which often precede periods of consolidation or pullbacks rather than continued strong rallies.

How does seasonality around Martin Luther King Jr. Day affect market expectations?

Historically, the week following MLK Day—especially in midterm election years—tends to see mild weakness, aligning with other indicators suggesting potential short-term pullbacks.

What is happening in precious metals like gold and silver?

Gold and silver remain in long-term uptrends but have become short-term overbought, with silver showing extreme volatility and large daily swings, signaling increased risk.

Why does the speaker emphasize watching bonds despite apparent calm?

Bond market calm has previously preceded sharp equity sell-offs, making it a potential warning sign that volatility could return even if bonds appear stable.

What does the breakdown of the Magnificent 7 relative to the S&P 500 imply?

It suggests sustained rotation away from mega-cap leaders and toward other sectors, which may continue for some time and reshape market leadership.

How is Bitcoin positioned technically according to the script?

Bitcoin has broken above key resistance around 94,500, triggering a squeeze and setting up potential upside toward the 104,000–106,000 range if higher highs and higher lows hold.

What are the key risks and opportunities highlighted for the coming weeks?

Risks include earnings disappointments, valuation concerns, and seasonal weakness, while opportunities lie in sector rotation, small caps, commodities, and selective crypto strength.