Two weeks ago, the prediction was that a “meaningful adjustment was needed.” Citadel’s chief strategist believes: things are now completely different, and the technical adjustment is “basically complete.”

Two weeks ago, the prediction was that a “meaningful adjustment was needed.” Citadel’s chief strategist believes: things are now completely different, and the technical adjustment is “basically complete.”

Two weeks ago, there was a warning that the US stock market needed to undergo a meaningful technical reset. Now, Scott Rubner, Chief Equity and Derivatives Strategist at Citadel Securities, believes that reset is essentially complete, and the market is shifting from being driven by positioning to being driven by fundamentals.

Rubner notes in his latest report, "The market we are entering is fundamentally different from the one we left two weeks ago." Of the ten market indicators he tracks, nine have seen substantial improvements over the past two weeks, and "the checklist has basically turned green." In his view, retail investor demand remains highly resilient, resistance at the positioning level has faded, leading stocks are broadening, and valuations are becoming more attractive as earnings season approaches.

The immediate implication for the market: the technical headwinds that previously suppressed US stocks are systematically weakening, and the key variable determining the next phase is the upcoming dense releases of Q2 corporate earnings. Rubner states clearly, "Flows brought us here, earnings will decide where we go next."

Retail Buying Hits Record, Structural Support Remains Firm

In Rubner's analytical framework, retail behavior is the primary observation dimension, and current data shows this support is exceptionally strong.

According to his platform data, there has not been a single net selling day in July so far. The average daily net buying size this month is about 3.2 times the historical monthly average, making July 2026 the second strongest month for retail net buying since January 2020, and also the strongest July on record in the dataset.

For momentum stocks, the last week of June and first week of July were the strongest two weeks for average daily net buying of momentum long/short pairs ever recorded by the platform, about 2.5 times the average over the past year. On July 1st, the platform saw a historical record for single-day net buying of this pair, reaching nearly 12 times the past year's daily average.

However, there are signs of localized weakness in the semiconductor and hardware sectors. On the most recent two down days for the Philadelphia Semiconductor Index (SOX), retail investors opted to sell related stocks, which is a rare divergence from the "buy the dip" behavior seen in this cycle. Rubner points out, each decline was followed by a rapid rebound, and SOX has shown strong forward returns over the next 30 trading days.

Systemic Positioning Pressure Eases, Market Pressure Remains Individual Rather Than Systemic

On the technical positioning front, Rubner judges that market pressure is individual, not spreading systemically.

Hedging demand is increasingly concentrated at the single-stock level beneath the indices, rather than expanding to the broader market. The skew of broad indices and ETFs remains controlled—the one-month 25 delta put/call skew for the S&P 500 is only at the 10th percentile of the past year, while SOX skew during the same period is as high as the 94th percentile, highlighting concentrated hedging demand in growth exposures like semiconductors rather than the overall market.

For leveraged ETFs, assets under management have contracted by about 10% from around $218 billion to $198 billion, and the magnitude of systematic rebalancing flows has accordingly declined. Semiconductor-related leveraged products have shrunk by about 20%, tech (excluding semiconductors) leveraged ETFs by about 5%, and other leveraged products by about 2.5%.

Financing conditions have also improved. The one-month stock financing spread has narrowed sharply from a recent peak of SOFR + 138 basis points to about 60 basis points, sitting at roughly the 61st percentile over the past year and lowering the cost of holding long exposure.

Additionally, Rubner notes a structural indicator: the spread between VIXEQ and VIX has hit an all-time high, while implied correlation is near historic lows. This means the current market is defined by individual stock selection rather than macro beta; dispersion, not overall market direction, is the core feature.

Leadership Broadens, Tech Valuations Below Ten-Year Average

Changes in market leadership structure is another key reason for Rubner’s shift in stance.

The S&P 500 is up about 1% for the month, but tech stocks have lagged. Gains were mainly contributed by sectors that underperformed in the first half of 2026, with communications services and financials especially prominent.

This movement is particularly evident on index down days. Since early June, on 14 S&P 500 down days, 9 days (64%) saw most constituents close higher; over the past year, this ratio was only 32%. The average number of stocks rising on down days has nearly doubled—over the past 20 S&P 500 down days, an average of 239 constituents closed higher, compared to the 20-year average of just 133.

In terms of valuation, although the S&P 500 is less than 1% from its historic high, the forward PE ratios for the S&P 500 info tech sector, Nasdaq 100, and S&P 500 semiconductor industry are all below their respective ten-year historical averages. Rubner notes that some of the highest quality growth companies in the market are entering earnings season supported by valuation, not pressured by it.

Earnings Become the Sole Uncertainty, Semiconductor Earnings Are Now an Index-Level Event

Of Rubner’s ten indicators, the only one not yet green is whether earnings will meet expectations.

The market currently expects second quarter S&P 500 constituent EPS to grow 22.4% year-over-year—if achieved, this will be among the strongest earnings growth in history outside major recession recoveries. Notably, despite some pullback in valuations, earnings expectations have continued to be revised upward, maintaining the trend seen before the first quarter earnings season.

The last week of July will be the "Super Bowl" of Q2 earnings season. It's expected that around 36% of S&P 500 market cap and 33% of Nasdaq 100 market cap will report, including 4 of the "Mag 7." By the end of July, about 60% of S&P 500 constituents are expected to have reported results.

Meanwhile, corporate buyback windows are gradually reopening, bringing the market’s largest structural buyers back into equities.

The importance of semiconductor earnings stands out. The semiconductor industry currently accounts for about 18% of S&P 500 weight, up from only 3% ten years ago. The average three-month implied volatility for the ten largest semiconductor companies has surged from 29% in 2016 to nearly 73% now. Rubner points out that semiconductor reports are not concentrated in a single week but are dispersed throughout the earnings calendar, meaning related event risk will persist through the rest of July and all of August. "Semiconductor earnings are no longer just a sector event—they’ve become an index-level event."

Rubner concludes: the technical reset is essentially complete, and the next two weeks will test whether fundamentals can support this rally to continue.

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