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Morgan Stanley Spots An Extremely Rare Market Signal Which Precedes Selloffs

In the past two weeks, we have discussed extensively (herehere and here) the “fundamental” risk that higher rates pose to tech names in particular (most notably the venerable five FAAMG ultra-high duration “generals” which account for a quarter of the S&P’s market cap), and the broader market in general.

But in addition to risk from higher nominal and real interest rates, extended technicals – the result of the extreme “off the charts” euphoria we pointed out over the weekend

… may signal lower than average returns in the short term, according to Morgan Stanley’s Mike Wilson who points out that 92% of the stocks in the S&P 500 (extremely strong breadth) are currently sitting above their 200-day moving averages.

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