We’ve been talking for a while now about the similarities between the July 2023 and July 2024 price action and our current bull run. Last week, I wrote about SPY’s tendency to show bearish RSI divergence before every major top in recent years. That divergence had been showing up clearly on QQQ, but not on SPY—until now. SPY's RSI had previously pushed up to 75.54, which is historically an area where we see some form of retracement.

This week’s price action once again gave us the divergence I was looking for on SPY making it very similar to the July 2024 divergence at the top. However, RSI divergence alone doesn’t prove a top is here. Just look back at 2023—we saw divergence for months before any meaningful pullback materialized and we already had divergence between the May and June highs on the SPY and have only gone higher since.

What I like to see at tops is a reversal candle or bearish gap to confirm the move. On Thursday, we got that: a bearish engulfing reversal candle. The day opened at new all-time highs, pushing into our major trendline and just above the three bearish candles that started the week. Generally, a gap just above 3 bearish candles and some sideways consolidation is a very bullish thing, however this market feels tired. So instead of continuing higher on the bullish gap, it dropped hard, closing below five days of price action and right at the low of our rising wedge support. If this is going to actually signal a top, we need to break the trendline support and then close strongly below the horizontal support at $618. If it does either one of those on a bearish gap, that’s even better.  If that happens, I will be fully in the camp of preparing to buy the dip at a discount in order to ride it to new all-time highs and beyond in 2025 and 2026.

Let’s not forget—Jerremy Newsome went fully to cash this week. So, if this is the top, then technically Jerremy has now called the top and bottom of this move. He likes to say you don’t need to call tops and bottoms in the market to make money, but apparently, he still likes to.

SPY

Topping Signals as I See Them Right Now:

• SPY is at the top of the channel it’s been trading in since 2022.

• Daily RSI is at 75, which is a historical reversal level.

• Bearish divergence on both SPY and QQQ.

• Bearish engulfing candles on both indices.

• RSP (equal weight S&P 500), IWM, and DIA are all lagging SPY and also showing bearish divergence.

• SMH made a new high this week—but on lower volume and with month-long bearish divergence.

• DXY has formed a solid double bottom and is pushing higher—generally a headwind for equities and crypto.

• Key AI names like NVDA, TSM, and AVGO are making new highs on divergence after 100%+ runs in just a few months.

• VIX is back to 14—right where it was before the February top.

• And, again, Jerremy is fully in cash.

That’s a whole lot of reasons to be cautious right now.

SMH

How Much Dip is Too Much Dip?

The dip—which has taken longer to show up than I’d like—may finally be around the corner. It’s been about as elusive since April as Bigfoot, but the signs are adding up right now.

I still believe this will be a buyable dip, not a market crash. For a true breakdown, we’d need a black swan event—and that’s not something you can predict. You just manage risk and adapt as best you can if one shows up. Here is what I’m watching for in a pullback in August and September:

1. Slight Drop – A 5–6% pullback into the June 24th gap and strong support around $600. This would be a healthy dip that resets some indicators without breaking the overall uptrend.

2. Goldilocks Zone – A 9–10% drop into the $580–$570 support area, where the daily long-term moving averages converge with the May 12th breakaway gap. This would be the ideal dip in terms of risk/reward, offering strong technical support and room to reload for another leg higher.

3. Deep Dip – A 13%-15% drop and more sustained correction down to the start of our rising wedge, with key support around $555, and potentially even the 100-week SMA. While I don’t think this scenario is highly probable given the current market strength, it’s worth noting. This would only be a 50% retracement of the rally from the April lows, so is still completely possible.

4. Black Swan – A close below the 100-week SMA. This is no longer just a dip—this would qualify as a crash. In that case, the weekly 200-day SMA comes into play, and we’d be looking at two 20%+ corrections in the same year, which would be a historic occurrence.

Realistically, I’m planning for scenario 1 and 2, as I believe those are the most probable outcomes.

SPY Channel

Could We Skip the Dip and Melt Up to $700 on SPY?

Yes—there’s still a chance the market powers higher, driven by AI momentum and continued inflows. In that scenario, maybe we see another breakaway gap on NVDA that launches it toward a $5–$6 trillion valuation this year. That valuation is likely coming in the next few years anyway—I just think a healthy correction for NVDA and most names is more probable, given how far we've already run.

For this melt-up without a correction to play out, we’d likely need to see the DXY drop again and break new lows, while TLT either grinds sideways or starts climbing. If that happens—and we get some consolidation in time instead of price—I could get behind this scenario, even if I’d rather see a cleaner reset first.

As it stands, I’m still leaning heavily toward a dip to the $600–$587 range on SPY in the next month or two. That dip should bring some excellent buying opportunities—and we’ll be ready for them in the RLT Newsletter.