Market breadth is a 'pipe dream' until next cyclical bear market, says Macro Risk's John Kolovos

Market Outlook - The S&P index is currently experiencing a decline, down approximately 0.8%, but there is an expectation for it to rise towards 7,000 by early next year, potentially reaching as high as 7,500 to 7,600 by 2026 [1][3][10] - The market structure has changed significantly over the past few years, becoming more concentrated, which raises concerns about sustainability [4][6] Market Breadth and Volatility - Recent market activity has shown poor breadth, with one of the worst breadth days occurring on an up day, a phenomenon that has become more common since 2020 [5][6] - The current market is characterized by a narrow participation, and expectations for broad market expansion may be overly optimistic [6] Semiconductor Sector - The semiconductor index is currently overbought, sitting 35% above its 200-day moving average, with over 90% of stocks also above this average, indicating potential for a 7% to 10% decline [8][9] - Historical patterns suggest that such overbought conditions could lead to significant pullbacks, although it is too early to definitively state that a bubble has peaked [9] Economic Indicators and Future Projections - The upcoming midterm election year is expected to bring above-average odds of a major correction or cyclical bear market, suggesting a potential top in the equity market [11][12] - Interest rates are highlighted as a critical factor, with the possibility of a mini 2018 scenario if the 10-year yield surpasses 4.20% [14]