U.S. stocks hit new highs, but market structure raises concerns.

U.S. stocks are still reaching new highs, and there is no dispute about this.

At the close of trading in Eastern Time on May 11, the S&P 500 rose 0.2% to close at 7,412.84; the Nasdaq increased 0.1% to close at 26,274.13, setting another all-time closing high.

But being strong doesn't mean it's easy.

The issue now isn’t whether the index has risen, but who is driving the rise—the same old key themes, such as AI, chips, semiconductors, and data centers, continue to push the index higher; for example, on May 11:

• The Philadelphia Semiconductor Index rose 2.6%, Intel (INTC.M) increased 3.6%, and Qualcomm (QCOM.M) rose 8.4%.
• The ETFs showed more direct differentiation: SPY.M rose 0.20%, QQQ.M rose 0.29%, and SOXX.M rose 1.74%;
• However, the healthcare ETF XLV.M fell 0.32%, and the software ETF IGV.M fell 0.44%;

From the perspective of the Meta asset pool, these core ETFs already have a clear trading correspondence with their related individual stocks, long ago revealing the market dynamics. Semiconductors are still rising, and the AI hardware chain continues to attract capital; only the strongest sectors still command high premiums, while healthcare lags behind, software is falling behind, and other sectors are increasingly becoming mere background noise.

In MacTong’s view, the current market focus has shifted beyond whether the index will continue to rise; it’s now about whether the underlying structure and breadth of the rally can sustain further upside. We are currently in one of the most typical states of a high-market environment: capital is still willing to go long, but only for the most certain, most crowded, and strongest assets.

In simple terms, the market hasn’t shut off risk appetite—it’s just decided not to allocate its risk budget to most stocks. So when looking at U.S. equities, you can’t just focus on indices; the stronger the index, the more you need to examine its structure—the more new highs there are, the more you need to check breadth.

The real problem at higher levels is never that the index stops rising, but that the index continues to rise while profitable opportunities become increasingly scarce.

What many people are finding most frustrating right now isn’t misjudging the direction, but noticing their position starting to feel off.

Selling, I fear being squeezed further; not selling, I worry a pullback will erase my earlier profits.

This is the most typical and authentic state of a high-level market. The trend has not been broken, the main theme remains intact—AI has not lost momentum, semiconductors have not weakened, and tech heavyweights continue to push the index higher. As long as the抱团 (concentration of investment) doesn’t dissolve, the U.S. market won’t automatically decline just because it “looks too expensive.”

The issue is that the current rally is no longer a recovery from low levels. At low levels, the market prices in the repair of pessimistic expectations—after all, as long as things don’t get worse, stock prices have room to rebound. But at high levels, the market prices in the realization of optimistic expectations; if performance doesn’t continue to exceed expectations, prices may decline first.

These are two entirely different markets.

Buying at low levels allows for some margin of error; buying at high levels leaves almost no room for mistake. In other words, when you buy low, you're betting on the odds and worrying whether it will rise at all; when you buy high, you're betting on the speed of realization and wondering why it should go even higher.

Objectively speaking, the worst thing to do right now is to hold onto the mindset of buying at low levels and continuing to add to your positions. Because if earnings reports are weaker than expected, order growth slows, gross margins falter, capital expenditures fall short, or inflation and interest rates rise again, the sectors that surged the most often become the first to be sold off.

This isn’t because the logic suddenly disappeared, but because the price had already priced in the most optimistic scenario.

In short, now is not the time to guess the top—now is the time to reassess your positions.

Has the U.S. stock market reached its peak?

I don’t think it’s reasonable to conclude right now that “the U.S. stock market has peaked”—it’s too early to say that, since the trend remains intact, the main theme hasn’t changed, and capital hasn’t withdrawn.

But just because these three things haven’t broken doesn’t mean you should do nothing. What you really need to guard against now isn’t a sudden crash this afternoon or an immediate shift to a bear market at tomorrow’s open.

What you really need to guard against is a more substantial and concentrated pullback at some point in the second half of the year.

The reason is not complicated.

This market rally was overly concentrated—for example, AI expectations were already fully priced in, semiconductor sentiment was overtraded, options activity was too intense, and interest rates and inflation never truly created a comfortable environment for high-valuation assets.

As long as these conditions continue to align, the index can still rise.

But the problem is here: the current rally is increasingly dependent on "everything going perfectly"—if any single link breaks, the market could shift from "continued short squeeze" to "concentrated pullback."

Now, pricing has become extremely selective. The market is no longer debating whether AI will grow—a first-order judgment—but whether AI can consistently exceed expectations, whether semiconductors can continually outperform forecasts, whether capital expenditures can keep getting revised upward, whether major clients’ orders can be consistently fulfilled, and whether high valuations can continue to be justified by even higher expectations... This is precisely what makes the current elevated levels so challenging.

It’s not just bad companies that fall—it’s good companies too; it’s not that the main themes have lost their logic—it’s that they’ve become too expensive, so expensive that even a slight dip in quality isn’t acceptable.

So the most important thing at this point is not to喊空 or to keep psyching yourself up, but to first reduce the net risk in your portfolio.

Keep what should be kept, and reduce what should be reduced.

The most important next step is to restructure your positions—after all, not all profitable positions should be held in the same way.

For example, core assets with genuine performance, orders, cash flow, and industry positioning should not be sold off simply out of fear of buying at a high price, because the most common—and most costly—mistake in a bull market is not losing money, but selling off the true main trend and then being too afraid to buy back in.

But trading positions cannot be handled this way. A position that has risen too quickly in the short term, driven primarily by sentiment and capital, should no longer be justified using long-term logic. It was always a trading position—it should be managed as one:

• If price surges on high volume but fails to hold gains, consider reducing your position.
• The index has reached a new high, but it’s not following—consider reducing.
• Breaking below the short-term trend level is not a reason to hold on stubbornly;

The most common mistake in a bull market isn't misjudging the direction—it's treating a trading position as a core holding and confusing short-term profits with long-term conviction.

These two issues may sound like matters of mindset, but they are fundamentally about account management. The core position can withstand volatility because you're investing in a longer-term thesis and stronger fundamentals; the trading position cannot—it loses its flexibility and becomes a burden rather than a position.

So what you should do now isn’t to handle all your positions at once, but first to clarify which positions you’re willing to hold through volatility, and which ones you’ve simply held onto because they rose quickly, sharply, and made you reluctant to let go.

The former can stay; the latter needs to cool down.

In addition, you should also closely monitor stagnant stocks going forward.

For example, on May 11, SOXX.M continued to rise by 2.39%—what does this indicate?

The AI hardware supply chain is still active, and the market’s strongest trend continues to hold, with investors still clustering in these sectors. However, precisely because the leading direction is still pushing forward, it’s even more important to examine stocks that are struggling to gain momentum.

In a bull market, the most dangerous assets are never the ones everyone knows are strong; the real danger lies in stocks that fail to keep up when indices hit new highs, refuse to bounce when sectors recover, and decline after positive news is released.

This stagflation signal is not complicated:

• The index reaches a new high, but it doesn't.
• The sector rebounded, but the rebound was weak;
• After the good news was released, it surged then pulled back;
• When the market dips slightly, it drops more.
• The market rebounded, but it rebounded less;

These stocks are already risky in a strong market.

Since these stocks fail to rise even when the broader market is performing well, and often decline first rather than catch up during market pullbacks, healthcare, traditional consumer goods, utilities, certain energy sectors, and traditional SaaS stocks can all be added to the stagnation monitoring pool.

Software deserves special attention. In this AI-driven market cycle, software companies are not without opportunity—but the traditional valuation logic for SaaS companies is becoming increasingly unsustainable. Companies like Salesforce (CRM.M), Adobe (ADBE.M), ServiceNow (NOW.M), and Intuit (INTU.M) are certainly not poor businesses.

The issue isn’t about company quality—it’s that the market is beginning to ask again: Will AI help them raise prices, expand revenue, and unlock new demand, or will it instead undermine the old narrative of charging by seat and premiumizing tools?

In other words, the software sector is no longer moving upward together.

Funds are now scrutinizing closely: who can turn AI into new revenue, who is merely using AI to extend their lifespan, who can still maintain their valuation, and who is just a high-valued relic of an old business model.

Therefore, next, you shouldn’t just focus on the strongest stocks—you also need to monitor lagging stocks, because strong stocks determine whether the index can hold steady, while lagging stocks indicate where the pullback may begin first.

At this stage, your portfolio may include defensive positions, but these are not intended to bet on an immediate market reversal.

If you have a heavy long position and don’t want to easily sell your core holdings, you can use small-scale short positions, index hedging, or protective puts to mitigate volatility.

The focus is on "small proportion" and "stabilizing volatility."

In simple terms, this isn’t about going all-in on a short position or betting that the market will crash tomorrow. The purpose of short positions here is to buy insurance, because at this stage, many people make another common mistake: seeing stagnant stocks and assuming they can serve as primary defensive holdings—which isn’t necessarily correct.

Stagnant stocks can be added to the watchlist, and a small position may be used as a supplemental short after a confirmed breakdown, but they may not be suitable as core portfolio insurance.

Because a hedge fund is truly designed to protect against what you fear most falling, not what you dislike.

If your primary risk exposure comes from QQQ.M, semiconductors, or AI technology weights, then your hedging strategy should directly target drawdowns in these areas: if you're concerned about a Nasdaq pullback, focus on QQQ.M; if you're worried about semiconductor declines, look at SOX-related instruments; if you're exposed to excessive concentration in individual stocks, first reduce your high-elasticity positions.

At this time, the biggest mistake is to be fully invested in the most crowded tech sector while shorting a medical or consumer stock that has been weak for a long time, thinking you’ve achieved hedging.

That’s not defense—it’s just placing your bet elsewhere.

Always remember that the goal of a defensive position is never to make big profits, but to make your portfolio less painful when things get tough.

Looking ahead in the short term, May 15 is an unavoidable window.

The reason is not mysterious—it’s sandwiched between a series of key variables: this day is the May standard options expiration date, commonly known in the market as OPEX; meanwhile, index options like SPX and XSP are no longer just monthly expiries, and market reliance on 0DTE and short-term options continues to grow.

Therefore, option expiration is itself more worth monitoring than in the past.

But what’s truly significant about May 15 is not that it “must fall” that day, but that it falls right after a key set of data releases: the April CPI will be published on May 12 at 8:30 AM EDT; the April PPI on May 13 at 8:30 AM EDT; and the April retail sales on May 14 at 8:30 AM EDT.

In other words, the market will first react to inflation, producer prices, and consumer data before entering the options expiration window—a combination that is inherently highly sensitive.

If CPI and PPI remain subdued, retail sales don’t strengthen enough to push rates higher again, tech weights hold steady, and semiconductors continue to perform strongly, then May 15 is more likely to be just a high-level consolidation, with bulls even able to push prices higher using the expiration structure.

However, if data remains hot and interest rates rise again, combined with QQQ.M and SOXX.M rallying and then pulling back, the portions previously pushed up by short-term options and momentum-driven buying could amplify volatility in reverse.

So May 15 was not a "must-fall day," but it resembled a stress test:

• Test whether technological weights can still support the index;
• Test whether semiconductors can still remain the strongest main theme;
• Check if there is new buying demand after the options expire;
• Test whether the stagflation sector will loosen first;

The real question isn't whether the price will drop on May 15th, but whether, after that day, there will be new money entering the market and willingness to sustain prices at such high levels.

I’m not rushing to say the U.S. stock market has reached its peak, but I’m taking seriously the possibility of a major correction in the second half of the year, because today’s market is genuinely strong—and genuinely expensive.

The trend hasn't broken, but a lot of optimistic expectations have already been priced in. What truly needs to be verified in the second half of the year is no longer those vague, broad issues.

The market has already answered the question of whether AI is a long-term direction; what truly needs to be tested are more specific and harsher realities: Can orders continue to accelerate? Can revenue truly materialize? Can gross margins be maintained? Can cloud providers continue to raise their capex guidance? Can interest rates support high valuations? Can capital continue to cluster? As long as these conditions hold, the market can certainly keep rising.

But as long as one link is not strong enough, the speed of the drawdown is likely to be much faster than most people imagine, because the market is no longer supported by cheapness—it’s now driven by expectations.

In a cheap market, even if prices fall, there’s still a valuation floor supporting them; in a market with high expectations, when prices drop, it often comes down to who can exit faster. So from now on, what matters most isn’t fleeing or blindly pushing forward—it’s changing how you hold your positions.

• Keep your core holdings—don’t sell them too soon; avoid holding onto your trading positions too long—
• Maintain strict discipline with highly flexible positions; reduce weight on stagnant stocks first;
• Defensive position, small allocation;
• Keep a little cash on hand;

Holding at high levels isn't impossible, but you must know exactly what you're holding—is it based on long-term logic or short-term sentiment? Is it an asset capable of weathering volatility, or a position driven solely by a surge of emotion? Are fundamentals still unfolding, or has the price already raced ahead of them?

For users who wish to continuously track changes in these main themes, relevant assets are already available on the MSX platform, and we will continue to monitor the evolution of these themes and the timing of associated assets.

In the end, the real conclusion is quite simple: after the U.S. stock market reaches new highs, the hardest part isn't predicting the direction—it's managing your position size.