Santoli: One key tech ETF may signal whether this bull market can keep marching on

• The QTOP ETF (encompassing Mag7, major semis, and AI-using corporations) peaked in May-June and remains 5% below that level; if it cannot reach new highs soon, the 'locomotive of this AI bull market could turn out to be leaking steam'
• Multiple measures show institutional investors are 'stocked up' for fall with aggressive positioning, while retail participation has softened, suggesting recent momentum is driven primarily by professional investors rather than individual traders
• Rising 10-year Treasury yields near 4.8% represent a 'normalization shock' but may actually provide better portfolio protection than in the past decade, with higher starting yields offering buffers against sudden market downturns

Market Summary: Tech ETF as Bull Market Indicator

Key Thesis

Mike Santoli identifies a critical tech ETF ("QTOP") that may signal the bull market's sustainability, as market dynamics shift from AI infrastructure plays to AI consumption stocks.

Market Performance & Positioning

The S&P 500 has maintained its upward trajectory, avoiding breaching its May-July range despite pullback opportunities. Professional investors remain heavily positioned for equity exposure, with Goldman Sachs, State Street, and Bank of America data confirming asset allocators are "stocked up" for fall. Leuthold Group's Courage/Fear Ratio has reached an 18-year high. The VIX remains below 15, while retail participation has softened—indicating institutional investors are driving the recent FOMO wave.

AI Trade Evolution

Since June 30, Nvidia has outpaced the semiconductor sector by 35 percentage points after 11 months of underperformance. Software stocks have recovered 70% of the "Saaspocalypse" selloff (October-April). The focus is shifting from AI construction proxies to AI consumption plays, following Nvidia's Hugging Face acquisition and Meta's open-source AI progress.

The critical "QTOP" ETF (encompassing Mag7, major semiconductors, and AI-using corporate giants) remains 5% below its peak from three months ago. Santoli warns that if it cannot print new highs soon, "the locomotive of this AI bull market could turn out to be leaking steam."

Bond Market Dynamics

10-year Treasury yields approaching 4.8% represent a "normalization shock." However, current yields provide better downside protection than in recent years. The 60/40 Vanguard Balanced Fund delivered 14.8% annualized returns (1990-2000) when bonds and equities moved inversely—69% of S&P returns with lower volatility.

Market Concerns

Federal Reserve meeting odds stand near 50-50 for hike-vs.-hold, with upcoming inflation data crucial. Risks include volatile oil prices and potential Japanese Treasury selling.