The S&P 500 is making new highs again, but I’m not chasing it here. The reason is simple: the index is at a new high, but macro support is starting to falter. A rally on no volume is, frankly, a sham—it’ll have to make up that volume sooner or later. Prices can be driven higher on sentiment and a handful of heavyweight stocks, but volume doesn’t lie. In past cycles, whenever the index hit new highs on volume well below its 50-day average, advances failed to broaden across stocks, and gains were concentrated in a few mega-caps, the market usually had to go through a “volume catch-up” phase afterward—either volume expanded as the rally continued and confirmed the trend, or the market pulled back on lighter volume to fill the gap and flush out the excess optimism. I’ve been trading the markets for 15 years and have seen plenty of people treat new highs as a safety net, thinking that as long as the index is making new highs, risk is locked in below. But the market loves to teach a lesson to people who think in straight lines.

More importantly, the pattern across 17 midterm election years is right there. Around midterm elections, policy expectations, fiscal maneuvering, and portfolio rebalancing all amplify volatility. Historically, the rallies that surged before reaching the 200-day moving average haven’t ended particularly well. For example, after the S&P 500 hit a new high in September 2018, it fell nearly 20% at one point in the fourth quarter. After the index surged in May 2006, there was also a significant pullback that summer. And 2022, another midterm election year, needs no explanation: several rallies were pushed back down by even greater macro pressures. I’m not saying the same thing has to happen every time. But when “new highs in the index” and “weakening macro support” occur at the same time, the odds aren’t as favorable as they appear.

On the macro side, high interest rates, downward revisions to earnings expectations, tightening liquidity at the margin, and widening credit spreads—any one of these factors could turn a new high into a bull trap. The biggest danger with a rally on no volume isn’t a drop; it’s that no one is there to catch it. I’d rather miss part of the move than be the last one buying into a price-volume divergence. If you think I’m talking nonsense, take a screenshot and save it.