There Is a Bubble in People Seeing Bubbles

I’ve finally had enough. I’m tired of hearing about the “AI bubble.” I’m tired of every strong move in an asset being called a bubble. I firmly believe that calling something a bubble is code for “I missed the trade.” Or perhaps it’s just a way for charlatans to “get clicks” for their stock-picking service.

The simple fact of the matter is that there’s only a bubble in people seeing bubbles.

S&P 500 and NASDAQ 100 

Last week brought a pause after two consecutive weeks of closing near the top of the trading range. Both key indices remain well above rising 60-week moving averages and near record levels.

Source: Optuma 

NYSE Advance/Decline Line

Breadth in the market remains strong and broad. This flies directly in the face of the bear thesis that leadership is narrow and only AI stocks are holding the market up. The A/D Line sits close to record highs, and the one-year stochastic is back above 80% after failing to sustain the move below 60%.

Source: Optuma 

The Magnificent Seven

Now, let’s really talk about bubbles. We’ve been told repeatedly that this market is weak because leadership is concentrated in the top stocks—and that’s not healthy. Here we can see the Roundhill Magnificent Seven ETF (MAGS) trading just below record levels. That’s fine—so is the broader stock market.

However, when we look at the Mag 7 relative to the S&P 500, we don’t see a parabolic chart. No—we see a group trading at the same relative level as it was on December 16, 2024 (one year ago). That does not scream “bubble” to me.

Source: Optuma

The PHLX Semiconductor Index

Perhaps the bubble is more isolated, and we have to go deeper than the Mag 7? Looking at the PHLX Semiconductor Index, we again see an uptrend—one that has been steady since the April 2025 lows.

However, once again, we must look at the relative story. Here we see a group trading below its prior peak.

Source: Optuma 

Final Thoughts 

Strong price trends do not equal bubbles. Breadth is healthy; leadership is broad, and even the most talked-about groups are not showing parabolic relative moves.

The real bubble? It’s in constant chatter about bubbles. Until the data changes, the bulls remain in control—and the trend remains your friend.

Dan Russo, CMT

READ ALL RESEARCH BY POTOMAC CONTENT HERE. 

Disclosure: 

Potomac Fund Management (“Potomac”) is an SEC-registered investment adviser. SEC registration does not constitute an endorsement of the advisory firm by the SEC nor does it indicate that the advisory firm has attained a particular level of skill or ability. This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page. Potomac does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Potomac website or incorporated herein, and takes no responsibility for any of this information. The views of Potomac are subject to change and Potomac is under no obligation to notify you of any changes. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal to any historical performance level. 

PFM-351-20251215

Standard Disclosures