Fu Peng: Internal pullback divergence in U.S. stock markets hits critical point, catch-down decline of heavyweight stocks may trigger sharp volatility surge

Fu Peng posted on Platform X that heavyweight stocks have remained at elevated levels supported by passive capital and concentrated positions, making the broad market indices appear stable, while the majority of individual stocks are undergoing deeper technical pullbacks. He notes that when the pullback spread between the S&P 500 Equal Weight Index and the market-capitalization-weighted S&P 500 Index expands to the 4%-6% historical extreme range, it typically indicates that market breadth is approaching its limit. At this juncture, even a minor catch-down decline from heavyweight giants could trigger a dramatic surge in the VIX volatility index. Fu Peng holds that this pullback spread has recently reached its critical point, and the internal market imbalance is being corrected as volatility rises.

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