Record calm in the market: why Michael Burry sees this as a signal to flee
Michael Burry, the legendary investor who predicted the 2008 mortgage crisis, is sounding the alarm once again. This time, his concern is the unusual, almost unprecedented silence in the U.S. stock market. In my analysis, this is not a reason for optimism, but rather an ominous harbinger.
182 sessions without sell-offs: an anomaly that breaks history
I am closely tracking a technical indicator that rarely makes headlines: days when at least 80% of trading volume on the New York Stock Exchange (NYSE) comes from declining stocks. This week marked the 182nd consecutive trading session without such an event. Over the past three decades, there has been no similar period. The previous record was nearly 50 sessions shorter. This is not just a statistical coincidence, but a structural anomaly.
Historical data shows that in each year over the last 30 years, such days occurred at least five times. If 2026 passes without a single such day, it will be the first case in the history of observations. This technical factor is easy to ignore, but it reflects fundamental imbalances I have been talking about for a long time.
The illusion of growth: a few stocks versus the entire market
The major indices look stable, but behind this facade lies a troubling picture. All the growth is driven by just a few giants in the artificial intelligence sector. There is no broad rally. I see the main risks in shares of Nvidia (NVDA), Micron Technology (MU), Caterpillar (CAT), Palantir Technologies (PLTR), and Tesla (TSLA). These are not just my assumptions — I have opened short positions on some of these stocks, including Nvidia and Micron.
Particularly dangerous is the fact that passive index funds are also betting on these same stocks. This creates a vicious cycle: the more capital flows into indices, the more inflated positions in these few stocks become, amplifying potential price swings when a reversal occurs.
Parallels with 1987 and the dot-com bubble
The current situation eerily reminds me of two historical episodes: the crash of 1987 and the peak of the dot-com bubble. In both cases, the market was driven upward by a few large stocks, and then mass sell-offs began. Then, as now, the calm was deceptive, and the concentration of capital was extreme.
Key advice: avoid debt
The key lesson for investors is not about precisely predicting the moment of reversal. My main point is simple: do not get caught up in others' mistakes along the way. Avoid borrowed funds, and the chance of being trapped will be minimal. Major market cycles can last months or even years, and during this period, the main threat to those waiting for a reversal is precisely leverage.
The example of the hedge fund Situational Awareness, managed by Leopold Aschenbrenner, is telling. Last month, it fully sold off its portfolio of public stocks, booking large losses on shares of chipmakers and data centers, including SK Hynix. This further confirms that even the most sophisticated players are not immune to mistakes in this cycle.
My verdict: the calm in the market will end before the shares of the largest companies begin to fall. Investors should prepare for volatility and reconsider their risk management strategy, especially regarding the use of borrowed funds. The current situation is not a time for complacency, but a moment for maximum caution.