Bitcoin's new high indicates that S&P will break the top? Fundstrat wary of “falling waterfalls” under extreme bears

The Zhitong Finance App learned that Tom Lee (Tom Lee), head of research at Fundstrat Global Advisors, recently pointed out that although the closing price of the S&P 500 index has only 2% space left from its all-time high of 6,144.15 points, the current market sentiment is showing the characteristics of the “least pleasing V-shaped rebound” — investors are generally unprepared for a rise, which instead lays the groundwork for a potential “waterfall.”

In his recent macro analysis, Li placed special emphasis on two key data points: the current total number of short positions in the S&P 500 index reached 7.7 billion US dollars, a record high of at least five years; while of the 12 typical “waterfall falls” since 1929, 8 eventually evolved into a “V-shaped bottom”, and only 4 had a double bottom. This historical pattern subtly echoes the current extreme bearish layout.

“Cryptocurrency is becoming an important leading indicator for the stock market.” Lee pointed out that the price of Ethereum has doubled and broken through the 200-day EMA, and Bitcoin was the first to reach a record high in May, about two months ahead of the S&P 500 index. Historical backtesting shows that when crypto assets experience such strong breakthroughs, small-cap stocks tend to strengthen.

Based on the above judgment, Li suggested focusing on five major directions: surpassing stocks, the tech giant, Bitcoin, the industrial sector (XLI.US), the financial sector (XLF.US), especially regional banks (IAT.US), and small-cap stocks (IWM.US). He revealed that in the past eight weeks, the group has shown excess earnings — the Big Seven outperformed the S&P 500 by 900 basis points, and Bitcoin recorded an astonishing 1,800 basis points of excess revenue.

Regarding the market outlook, the strategist maintains positive expectations: “Bitcoin has reached a record high as a leading indicator, which suggests that it is only a matter of time before the S&P 500 breaks through its all-time peak.” However, he also warned that before bears concentrate on closing positions, the market may still experience sharp fluctuations. Currently, investors need to carefully seize structural opportunities, especially when traditional safe-haven assets and risk assets strengthen at the same time, which often indicates the beginning of a trending market.