We got Tom Thornton, founder of Hedge Fund Telemetry and a veteran market technician, on the phone to talk about something every allocator is staring at right now: an AI-driven tape at all-time highs…what's actually happening underneath, where it cracks, and what most people are getting dangerously wrong.
Why This Call Now
The S&P is at all-time highs, the NASDAQ is up 8% month-to-date, and semiconductors have gone parabolic on the back of an AI CapEx story that everyone has agreed not to question. Tom brought the only thing that matters when price and conviction are both stretched: the internals. Sentiment, breadth, exhaustion signals, options activity, concentration; every dashboard he watches is pointing the same direction, and most of his peers are seeing things they say they’ve never seen before.
What Tom Is Watching
Equity bullish sentiment is back in the extreme zone, and the 20-day moving average of sentiment is stretched to a level that historically marks the front edge of pullbacks. Sentiment can stay elevated; it can also stay depressed. But the combination of extreme sentiment with DeMark exhaustion signals firing on the indices and on tech is the tell. The market ran out of buyers before it ran out of price.
The internals are doing something the people who watch this for a living have never seen. The S&P is up 4.2% month-to-date with 209 stocks up and 295 down. The NASDAQ is up 8% month-to-date on a near-even split (51 up, 50 down). The index is 9% above its 50-day moving average while only roughly half the components are above their own 50-day; at that distance you’d normally expect 80% breadth. Four days running, more S&P stocks hit new 52-week lows than 52-week highs, with the index at all-time highs and up 30% year over year. Yesterday 9% of the index hit new lows. None of this happens together in a healthy tape.