MW This trader is sounding the alarm over stocks. Why he's pressing the sell button now.

By Jamie Chisholm

A summer swoon is likely, says The Macro Tourist

Wall Street heads into payrolls Friday with a bit of concern. The previous session saw very bullish reactions to Meta $(META)$ and Microsoft $(MSFT.UK)$ earnings. But after surging to a fresh intraday high, the S&P 500 SPX instead finished down on the day.

Granted, it was the end of a month, when some technical portfolio fiddling can happen. And there may have been worries about the looming tariff deadline on Aug. 1. Still, for the major indices to relapse on what was broadly agreed to be positive corporate backdrop is not a good look.

Indeed, it's the kind of action that will encourage Macro Tourist blog author and former institutional trader Kevin Muir, who says he's going "back to the short side."

When Muir spoke to MarketWatch a few weeks ago, he said he was becoming increasingly wary of the market. At the time the S&P 500 SPX was trading around 6,250. But early on Thursday it traded above 6,400, and in a new blog post, he says the "terrific earnings reports from Meta and Microsoft" have given him the opportunity "to pull the trigger on a sell call."

"There are a bunch of reasons for my shift in tone, but with the good news from MAG 7 earnings, and the tariff deal 'wins' being announced by Trump, we've hit a point where much of the good news is baked into the price," says Muir.

His longer-term concerns about the market remain; investors' over-allocation to the U.S. market, their severe concentration in big tech, economic policy volatility, and what he terms the extended nature of economic expansion.

Rich valuations are also a problem, says Muir. In April, at the height of the Liberation Day tariff worries, analysts sharply cut their 12-month forward earnings per share estimates, while uncertainty saw the multiple applied to those earnings drop from 22.5 to 18 times.

That gave the market a lower valuation bar to hurdle. But now earnings estimates are at all-time highs and the earnings multiple is back to 22.5. "Of course, maybe this time 22.5 times doesn't prove to be the top in multiples, or maybe earnings estimates find a way to accelerate even more from here, but the risk/reward is now skewed to the downside," says Muir.

And he now reckons this could all coalesce into one of the market's fairly regular summer swoons.

So far this year, the market has had no respect for the "sell in May and go away" mantra, Muir notes. There was a 3.4% correction in mid May, but it lasted less than a week. This got him thinking: How often does the market just rally all summer long? "It certainly feels like we're never going to correct, but is this a reasonable assumption?" Muir asks.

He created the table below showing all the summer drawdowns over past 30 years, highlighting all the pullbacks of less than 5% in blue, and the only dip smaller than the latest one in purple.

Muir notes that all the less-than-5% corrections started in mid-June or later. Not one started in May. "I suspect that the current mid-May correction will not prove to be the maximum summer drawdown. Although there is nothing stopping the rally from continuing, the longer it continues, the more overbought it becomes, and the larger the inevitable correction," says Muir.

He also believes that buying by volatility-control funds currently is slowing down, removing another support for the market.

So it's time to short the current rally, he reckons. (Note, he wrote this before Friday's fall in equity index futures). "If I am wrong, I probably lose 100 S&P 500 points to the upside, and if I am right, we get a quick whoosh for 300+ handles to the downside," he says.

Markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are dropping as benchmark Treasury yields BX:TMUBMUSD10Y nudge higher. The dollar index DXY is rising, while oil prices (CL.1) fall and gold (GC00) is trading around $3,346 an ounce.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              6339.39    -0.38%  0.96%   7.78%   16.39% 
   Nasdaq Composite                                                     21,122.45  0.31%   2.53%   9.38%   22.85% 
   10-year Treasury                                                     4.387      -0.50   3.60    -18.90  59.40 
   Gold                                                                 3346.1     0.23%   -0.01%  26.78%  34.59% 
   Oil                                                                  68.89      4.13%   2.56%   -4.15%  -10.45% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

U.S. president Donald Trump hit dozens of countries with tariffs but yet again extended his deadline, from August 1 to August 7. Stock markets in Asia and Europe fell on the news.

The U.S. nonfarm payroll report for July will be published at 8:30 a.m. Economists expect 100,000 jobs were created, down from 147,000 in June. The unemployment is forecast to rise from 4.1% to 4.2%.

Other U.S. economic data due Friday include the ISM manufacturing survey for July; construction spending for June; and final consumer sentiment for July, all released at 10 a.m.

Apple shares $(AAPL)$ are higher after revenues topped estimates, but Amazon.com stock $(AMZN.UK)$ is lower after AI spending weighed on profit growth.

Energy majors Exxon Mobil (XOM) and Chevron (CVX) will lead the earnings slate before the market opens.

Ray Dalio has sold his last remaining stake in Bridgewater Associates, and stepped off the board of the hedge fund that made him a billionaire.

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The chart

For the most part, the S&P 500 has been trading inversely to the dollar index, notes Michael Kramer at Mott Capital Management. "Before May 9, when the dollar declined, stocks also fell; after May 9, as the dollar weakened, stocks moved higher. Now, with the dollar gaining strength again, equities are beginning to struggle," he says.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   AMZN    Amazon.com 
   AAPL    Apple 
   FIG     Figma 
   AMD     Advanced Micro Devices 
   GME     GameStop 
   PLTR    Palantir Technologies 
   META    Meta Platforms 
   MSFT    Microsoft 

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-Jamie Chisholm

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August 01, 2025 06:42 ET (10:42 GMT)

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