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

Market Outlook - Macro Risk Advisors expects the S&P 500 to reach at least 7,000 by early next year, potentially rising as high as 7,500 to 7,600 [3] - The market is attempting a rotation away from danger, with mega caps making indexes appear worse while the majority of stocks try to hold steady [3][4] - The market structure has become highly concentrated in recent years [4] - The industry notes that a midterm election year typically involves a major correction or cyclical bear market in equity markets, suggesting a potential shakeout next year [11][12] Technical Analysis & Indicators - Semis are overbought, with the semi-index 35% above its 200-day moving average and over 90% of stocks above their 200-day moving average, historically indicating a potential 7-10% decline [8] - Small caps are making new highs, but the AD line is making almost new lows, which is a divergence that is very important to monitor [14] - Interest rates are key, and the 10-year yield rising above 420 basis points (420%) could lead to a mini-2018 scenario [14] Market Breadth & Participation - The industry believes that expecting the market to expand and see broad participation is unlikely in the near term, possibly not until after the next cyclical bear market [6] - Breath has been abysmal within small caps, indicating a lack of support from real economy stocks [13]