The biggest threat to the stock market

Dear Fellow Investor,

The S&P 500 hit another all-time high last week.

If you’ve logged into your brokerage account lately, there’s a good chance it looks better than it has in years.

On the other hand, I’ve been warning you to take it easy, not make crazy bets, pull in your sails a bit.

If you follow our services, you know we’ve taken profits and been very selective about what we add to our portfolios — only the best of the best make it through.

If you check your brokerage account daily, you almost certainly saw the S&P 500 crash today.

Here’s why:

The Biggest Threat to the Stock Market Isn’t What Most People Think

It’s not war in the Middle East.

It’s not oil price.

It’s something much simpler -

A single number you can check yourself anytime you like.

The 10-year U.S. Treasury rate.

If you’ve been a reader for a while you know I like to come out every few months and remind you that this single number is more telling about what the stock market will do than anything else.

And here’s what you want to look out for:

Whenever the 10-year treasury rate hits 4.5%, money starts to exit stocks.

As I write this, that rate sits at 4.52%.

The last time we saw a big spike?

May 19, 2026.

And what happened to the S&P that day?

It dropped.

I’ve said it before, and I’ll say it again:

The stock market and the 10-year bond have an inverse relationship.

And once that 10-year yield hits 4.5%, you can almost guarantee an S&P dip.

And the tech heavy Nasdaq got hit even harder on a chip stock sell-off.

We’ve talked for a while now about how a lot of the so-called stock market value has been really concentrated in the Mag 7.

And last month I pulled back the curtain on the stark reality of what’s really happening inside this frothy market…

Nearly Half the Market Has Already Broken Down

Here’s a number Wall Street doesn’t want you to focus on:

Only a little over half of S&P 500 stocks are trading above their 200-day moving average right now.

In plain English? That means almost as many stocks have already broken below the line that professional money managers use to define a long-term uptrend.

Nearly half the stocks in the market had already cracked when the index hit all-time highs.

How is that possible?

Because the S&P 500 is a weighted average.

That means the reality behind this “great stock market” has been a handful of mega-cap stocks — the same ones that powered the AI rally — dragging the index higher while the rest of the market quietly falls apart underneath.

Goldman Sachs flagged it last month.

They found that the median stock in the S&P 500 to be 13% below its own record high. That’s the widest gap in 25 years.

Bank of America’s data is even more striking…

In April, only 23% of S&P 500 members outperformed the index.

That’s the fourth-lowest monthly reading in their database going back to 1986.

The last few times breadth deteriorated this badly while the index was making new highs? 2000 and 2007.

I don’t say that to scare you. I say it because I’ve seen this movie before.

The $86 Billion Time Bomb You’ve Never Heard Of

But here’s where it gets really dangerous.

There’s a category of Wall Street fund called a CTA — a Commodity Trading Advisor.

These are systematic, computer-driven funds that follow trends.

They don’t think. They don’t analyze earnings. They follow the price.

When stocks go up, they buy. When stocks go down, they sell.

Automatically. No human decision involved.

Right now, their exposure to U.S. stocks sits in the 88th percentile of its historical range.

They are loaded to the gills.

And Bank of America estimates that in a down-market scenario, these funds could be forced to dump up to $86 billion in stocks within a single week.

Not because a portfolio manager got nervous.

Not because earnings disappointed.

Simply because prices crossed a line.

The current trigger zone? 6,500 - 6,707.

If the S&P 500 falls to that range, the machines start selling — which pushes prices lower — which triggers more automatic selling.

It’s a cascade. And it can happen fast.

The last time CTA positioning was this extreme and breadth was this weak, it preceded a 19% drawdown.

Six Warning Signals Are Now Flashing at Once

In my 33 years on Wall Street, I’ve learned that one warning signal is a yellow light. Two is a concern. Three or more means you better pay attention.

Right now, I count six.

One: Market breadth is collapsing. Nearly half of stocks have already broken.

Two: The market has been overbought. Bloomberg’s sentiment model recently categorized it in “manic” territory.

Three: $86 billion in forced systematic selling is loaded and waiting for a trigger.

Four: It’s a midterm election year — historically the worst seasonal stretch for stocks.

Five: The Strait of Hormuz is still effectively closed. Energy costs are feeding directly into inflation, and there’s no deal in sight.

Six: The latest CPI reading is running hot. The Federal Reserve is paralyzed — four dissenting votes at the last meeting, the most since 1992.

Each of these signals alone would be concerning.

Together, they form the kind of convergence I’ve only seen a few times in my career.

And every time I’ve seen it, what followed wasn’t pretty.

Why I’m Telling You This Now

People doubted me in 2007 when I predicted the Great Recession a year before it happened.

The market was flying. Housing was booming. Everybody was making money.

Then the S&P crashed 47%.

The people who listened to my warning had time to prepare. The people who didn’t were devastated.

I see the same kind of setup forming right now. The surface looks beautiful. The foundation is cracking.

I don’t believe in crying wolf. I’ve spent three decades building a reputation on getting the big calls right — and I wouldn’t put that reputation on the line if I wasn’t deeply concerned about what’s ahead.

Because if history teaches us anything, the people who saw the cracks before the collapse didn’t just survive — they built fortunes on the other side.

“The Buck Stops Here,”