Todd Sohn — The Market's Biggest Warning Signs Right Now

0:52 Why charts: 100 pictures tell the story

• "A picture tells a thousand words" — stranded on an island for a month, you'd come back, look at 100 charts and "have the story right there." Charts summarize succinctly and also tell you when you're right or wrong.

1:39 The momentum tool: RSI and its divergences

• RSI (relative strength index) measures how fast something is rising/falling — how overbought or oversold. The signal is in the divergence: a new high that is less overbought is a warning; a new low that is less oversold can flag a change of trend.

2:55 Semis (SOXX): in charge of the market

• This is "a market all about semis" — a massive run since March 30th (almost 3 months), now 18-19% of the S&P vs 2% a decade ago.
• Using SOXX (the most even-footed semi ETF, not over-weighted to Nvidia): super overbought, maybe consolidating after a big IPO + earnings — but the market "lives and breathes by this index." If it collapses, by definition the market collapses, and index investors will feel it.

4:16 Software (IGV): messy, a reprieve not a buy

• The software ETF has had a nice rally and mean-reverted to its 200/50-day — but it's a reprieve from oversold, negative sentiment, not a buy signal. If you take a flyer, structure it with options (pay the premium = your risk) and respect stops: "you're a speculator, not a buyer of the group."

5:25 Power (GEV): the leadership chart he'd buy

• A long-time favorite holding — the power story tied to semis. Without the ticker he'd call it a near-term buy: great trend, got very overbought, now consolidating on profit-taking. Still looks good; the question is the next catalyst (capex, earnings).

6:32 The mega-cap scorecard: Amazon, Meta, Oracle, Microsoft, Google

• Amazon — middle of the road, "an eh," a two out of three; play it with options, not a directional bet.
• Meta (7:09) — "looks more like a short": hasn't made a new high in months while the market does, and the 200-day slope is flattening/rolling over (trend changing).
• Oracle (8:43) — weird/messy like software; the 200-day is rolling over, "a lot of better opportunities out there."
• Microsoft (10:12) — "similar to Meta if not weaker," already retesting the spring lows (a red flag).
• Google (10:34) — "the best chart of the big names"; super overbought, so trim and revisit, but viable — most like GEV.

9:38 The exercise: print 100 charts

• The most useful thing to do: print out 100 stock charts (as Chris Verrone and Strategas's Jason Trennert do) and flip through them — "you get the message of the market very quickly."

11:13 The ETF book: ETFs are a behavior barometer — and ~30% of volume

• The book is about seeing markets through the ETF lens — flows, volumes and daily product launches make ETFs "a great measurement of investor behavior."
• ETFs now do ~30% of US exchange volume on an average day (stocks the other 70%), rising to 40-45% in stress. ~5,000 ETFs exist — more ETFs than stocks (still more mutual funds, but "on their way out").

12:56 The leveraged-ETF boom

• A leveraged ETF gives 2-3x daily exposure (a 2x Nvidia ETF is up 4% when Nvidia's up 2%) — but only daily; point-to-point there's slippage plus fees, so they're trading vehicles, not buy-and-hold. A ~$200B category up massively since 2020 — a bunch of new 2x single-stock ETFs (even "2x SpaceX") launched the day of taping.

14:17 High-beta vs low-vol at an extreme

• Beta measures how much a stock moves vs the market: Nvidia is ~2x beta, semis high-beta, staples low-beta. Semis-vs-staples has reached historically extreme territory (semis up a gazillion, staples — 4.5% of the S&P — barely up). Not a "sell everything" — still a bull market — just be aware beta is stretched and low-vol is in extreme underperformance.

16:18 "ETFs ARE the market": mutual funds in cumulative outflow since 1984

• Cumulative mutual-fund flows peaked ~8-9 years ago and are now negative since 1984 — the vehicle survives only because the market lifted the assets; in a bear market the asset-management industry would be in trouble.
• Most of those outflows — about −$5.1 trillion cumulative — are from actively managed equity mutual funds (18:30). The money is going to ETFs of every stripe, and increasingly to active ETFs (cheaper, transparent) — "they've audibled."

19:08 Tech ~40% of the S&P — "look under the hood"

• Infotech was 38% of the S&P that morning, nearing 40%. Own the S&P, Russell 1000 Growth or a thematic fund and you hold a lot of Nvidia/Microsoft/Meta because they're so big (cap-weighted).
• People think an index = diversified; because tech is such a huge share, "you're really not." (The "what about international?" pushback fails — Korea is two stocks, Italy three banks — and S&P-tracking money dwarfs it.)

21:01 "One game": $27B into tech ETFs vs −$4.4B everything else

• Cumulative sector-ETF flows since the March-30 S&P low: ~$27B into tech, and every other sector combined is −$4.4B. "There's been one game — tech." And within tech, take out software (a real problem) — it's semiconductors and hardware/equipment.
• "God forbid anything bad happens — if there's an unwind in tech, it's going to be ugly."

22:44 Factors are loaded with tech too — "quality" has morphed

• A factor sorts stocks by characteristics (value, quality, momentum, profitability/FCF) rather than size. People buy the quality factor to own resilient, lower-vol companies — but the S&P has become a quality index (mega-caps screen as "quality" on their huge free cash flow), so some quality ETFs now mirror the S&P. You're just adding more of the same at the top; the momentum factor can be full of semis too.

24:37 Leveraged-ETF usage at a record — and it adds volatility

• ~$200B across a few hundred products, usage "stair-stepping higher" — discovered since COVID because you can do it one-click on your phone (no margin account; it trades like a stock). A profitable business (~1% fees) → proliferation. "That makes me nervous."
• The mechanical risk: these funds rebalance at the end of every day to reset daily exposure, so on up days they buy more — adding serious volatility on certain days.

26:07 Levered single-stock ETFs: "kind of like a lotto ticket"

• 2x single-stock ETFs (e.g. 2x Nvidia) didn't exist before 2022 — now hundreds, getting smaller and smaller (quantum, small space names). Retail loves them (Robinhood/brokerage, no special account). "Things are getting frothy."

27:37 Thematic ETFs: poor drawdowns, poor Sharpe

• Thematic funds (nuclear, cybersecurity, space, natural resources) blur sector lines and reflect performance-chasing/herding. Three-year drawdowns average ~32% (some −50%; cannabis ~−80%), and 70% of thematic ETFs have a Sharpe ratio below 1 (high vol, mediocre risk-adjusted returns). "Chasing single themes can be detrimental."

30:23 History as a road map: the >15%-weight club

• Industry groups that have been more than a 15% S&P weight since 1990: tech hardware (the tech bubble — got to ~30%, semis were part of it), energy (mid-2000s, just above 15) and software (late last decade). Two of the three (energy, software) ended with bad results for the market and the group. Not a prediction it pops — just a map of how far this can run.

31:47 Broader sentiment isn't extreme yet

• Tech is the extreme part, no doubt — but trailing-1-year equity-ETF flows overall sit only at a lukewarm percentile given where the market is. Not yet the signal of a real top.
• Cyclical-vs-defensive flows are subdued too (32:26) — people are just buying tech. Within cyclicals, money goes to industrials (the power story) and none to financials (private-credit headlines scaring people — which he reads as contrarian-bullish).

33:47 Healthcare: most frustrating sector, best reversion setup

• Healthcare's the most frustrating sector of the last 3 years — money's poured out "forever" (unless you owned Eli Lilly / good biotech). It has shrunk from 16% of the S&P to 8% ("its own GLP-1"). Performance so bad you can argue it's bullish — a reversion-to-mean candidate, though "the same conversation a year ago" makes you sound foolish.

35:12 Small caps and energy: given-up and cooling

• Small caps — flows up but hardly endorsed; nobody cares (trillion-dollar IPOs are the excitement). Last year small-cap ETFs had outflows for the first time since 2011 — rare for a major asset class.
• Energy (35:46) — coming off the boil. A sugar-rush since ~Feb 27th flooded money in just as oil peaked; a ~June-15 Trump deal collapsed oil and energy stocks, and people are now taking profits.

36:24 Discretionary: a chart that "looks like a recession"

• Consumer discretionary is in the bottom decile — a barometer of consumer health, reflecting the K-economy (haves vs have-nots). (Equal-weight; cap-weight is skewed by Amazon and Tesla.) But pockets work — hotels, some cruise lines, restaurants turning, airlines.

37:33 Staples: do they matter anymore? Basically no

• Staples were ~19% of the S&P in the early '90s (the largest sector); now 4.5%, third/fourth-smallest. Nvidia is double the entire staples sector; Amazon/Alphabet/Microsoft each larger than it. (Maybe a Gen-Z thing — less drinking/smoking.) It'll take a market freak-out for algorithms to buy staples again.
• Derivatives-and-ETFs are a structural hurdle for staples (38:08): instead of staples for income/defense, you can now buy an S&P covered-call ETF (exposure + income) or a buffered ETF (downside protection).

39:24 REITs and "quality": diversifiers, real and fake

• REITs — he wants a case for them: ~2% or less of the S&P (the index is ~30 stocks, "you'd just buy one stock"), but in a 2000-type unwind REITs actually went up — they were the diversifier.
• "Quality is wasting space" (40:09) — a ~$50B quality ETF now has near-perfect R-squared to the S&P, so it's not a diversifier: why own something that does the same thing as the index?

41:09 Rates and the $8T money-market pile

• The long end is too tough to call; the 2-year has firmed (maybe the Fed has to tighten — "Don/Jason's lane"). $8 trillion sits in money-market funds (~25% of the bond agg) — very elevated; it's taking share from bond managers who could use it when the rate regime changes.

41:39 Gold (GLD): a "metal mania" blow-off, maybe bottoming

• Gold is falling off — he reads it as a blow-off from last year's "metal mania," not a rate story. The behavioral tell: it didn't rally on war/inflation when it "should" have ("pay attention when something supposed to behave one way doesn't"). Money is leaving gold ETFs — "maybe this thing starts to bottom out."

43:01 Bitcoin (IBIT): "rough," same setup — Kalshi stole the degens

• Bitcoin is "rough" — same as gold, people moving on. His thesis: the young traders moved to Kalshi; Bitcoin "got too ingrained, went from DeFi to traditional finance, which was death." Money is leaving Bitcoin ETFs, but "the bar's low" for both gold and Bitcoin to recover.

43:46 The takeaway: pay attention to what you own

• It's a bull market, but you may be loaded up on more exposure than you think in certain areas.
• Eisman's wrap (43:55): tech is ~40% of the S&P, >50% with Google + Amazon — own the index and you're not diversified. The best tech groups (semis, equipment) and power (GEV) aren't the software/AI-capex names that look "eh to bad" (Meta/Oracle/Microsoft/Amazon). It's all one theme: "if it ever reverses, there'll be no place to hide."