Don’t Let Market Momentum Knock You Out

​After one of the fastest stock market rallies in recent memory, it's tempting to jump in headfirst. But before you let FOMO take the wheel, here’s the cold truth: momentum swings both ways, and when it reverses—it bites.

The S&P 500 and Nasdaq have been flying high, and momentum indicators are lighting up. More than 55% of S&P 500 stocks hit a 20-day high earlier this week—a sign of a rare "breadth thrust," historically linked to more upside. The VIX has dropped from 40 to 20 in record time. On the surface, that’s bullish fuel.

But here’s the catch: when everyone is bullish, caution pays. Momentum often creates blowoff tops, where overextended markets snap back hard. As Cam Hui warns in his MarketWatch opinion piece, today’s setup feels eerily like the 1982 generational bottom rally—fast, furious, and eventually followed by a reset.

Indeed, the Nasdaq-100 is now approaching levels that typically precede a pullback. The VIX hit the bottom of its Bollinger Band—a classic red flag that a pause or reversal is near. Technical support around 5,640 on the S&P 500 could be the next test.

Breadth has also thinned. The rally has been led by the “Magnificent Seven” megacaps, while the broader market lags behind. That kind of narrow leadership can quickly unravel if sentiment sours.

What to Do Now
Don’t panic—but don’t chase. Hui suggests staying cautiously bullish and using any near-term dip as a buy-the-dip opportunity. The market’s overall trend is still up, but it’s moving too fast for comfort. If you’re already in, take profits on frothy names. If you’re on the sidelines, be patient—volatility will hand you better entries.

Bottom Line
This rally has been powerful—but also emotional. Ignore the noise, temper your expectations, and stick to strategy. Momentum is your friend—until it isn’t.







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