It’s a Momentum Market. But.

The article is as of June 30, 2025.

It’s a momentum market. But I’ve got a caveat.

Quant traders, here’s how the market possesses momentum characteristics from our view. At Market Structure EDGE, the probability of a gain of more than 3% in 1-5 days is “momentum.”

And wow. Run a sort at EDGE for stocks possessing those characteristics and you’ll find a bunch. AMD, ARM, SPOT, MU, COIN, CRWV, HOOD, MRVL, VST, CRCL, CCJ. I’m ranking by market capitalization but you get the idea. Those all have Demand at 10.0 and 3% or more daily volatility.

Over 1,650 stocks have a Demand/Supply divergence greater than two standard deviations (to see it, try EDGE here or through your IBKR account). The Momentum Daily Trading Ideas portfolio, which carefully screens for liquidity and probabilities, has 18 in it, the Low Volatility portfolio, with strong probabilities of smaller gains, has 33. That’ s more than double normal levels.

Over 50% of the stocks in the Communications Services, Consumer Discretionary, Financials, Healthcare, Industrials and Technology sectors have rising Demand.

And Supply, Reg SHO Rule 201 short volume data, has plunged from over 55% of S&P 500 trading volume June 13 to 50.2% now, a 10% retreat that accounts heavily for broad stock-market gains the latter half of June. And Demand has just now bottomed at 4.9, signaling more upside. Momentum.

Quantitatively, the market has bucked every signal of risk. Demand rose to 6.1 – over the 6.0 red line that statistically portends a top – Apr 24 and remained over that level until May 28. Back to 2012, the market has a propensity to deliver 0.03% on days when it’s over 6.0. That is, nothing – all the same as no chance of a return.

Yet stocks rose 7% between Apr 24-May 28.

Then Demand – 10-point scale metering buying and selling; over 5.0, stocks tend to rise, below 5.0, vice versa – declined from 6.1 May 28 to 4.5 Jun 4. S&P 500 stocks rose another 1.4%. Jun 5-16, Demand rose from 4.5 to 6.0 and stocks rose another 1.2%. Prices finally fell with options-expirations Jun 18-20 but only a tiny bit. Demand then fell from 6.0 Jun 18 to 4.9 Jun 27, and stocks rose another 2.8%.

Since the April bottom, no matter what condition exists in the market, stocks rise. And now they’re poised to do it again, with Demand and Supply everywhere moving in opposite directions.

Is this the real life or is this just fantasy, asked the rock band Queen?

There’s the caveat. Two things juiced stocks. Traders with no interest in owning stocks (we call this proprietary market-making “Fast Trading”) are the dominant force. And that steep decline in Supply I described. Machines and short-covering.

Is that a sustainable condition? Of course not. Stein’s Law: If something cannot last forever, it will stop.

The trouble is, we don’t know when it stops. But if moves defy Demand and Supply, the market is out of sync. It’s not a broken model. It’s an outlier market. And month-end options expire today as the newly reconstituted Russell indexes go live following Friday’s last annual reconstitution (next year it’ll happen twice, in June and November) and the quarter ends.

I love using Daily Trading Ideas in a momentum market. I don’t like it when the market and the model are out of sync. None of us knows or can predict what comes next – especially me! I’ve said publicly that prognosticating outcomes renders one a fool.

But these conditions say to me something is going to break. So beware. Maybe don’t chase this Momentum, this time.

PS – We’ll talk about it Thursday right ahead of the Jul 4 holiday and after monthly jobs data at 830a ET Thu! Come join!