Quick Read The S&P 500 has stretched 10-15% above its key moving averages, with the Nasdaq-100 surging 17.35% in one month and momentum indicators like the 14-day RSI staying above 70 overbought levels for over a week. Mean reversion toward 6,850-6,900 is likely as stretched valuations and extreme positioning in technology stocks have decoupled from underlying economic improvements for average Americans. RIA Advisors’ Lance Roberts trimmed mega-cap winners Alphabet (GOOGL) and Microsoft (MSFT), while rotating into defensive plays like RTX (RTX) and Eli Lilly (LLY). The analyst who called NVIDIA in 2010 just named his top 10 stocks and Invesco QQQ Trust wasn’t one of them. Get them here FREE. Lance Roberts of RIA Advisors warned on the Thoughtful Money podcast that the S&P 500 has stretched so far above its key moving averages that a mean-reversion move could be a higher-probability scenario heading into the summer. “The big risk here is right now… we’ve got this massive deviation that’s going on kind of in the markets. You know, we’re so far deviated above the 50, 100, 200-day moving averages. You’re going to correct this,” Roberts said. The Market Is Getting Dangerously Stretched Roberts outlined a specific downside scenario for the market. “You’re talking about potentially a corrective action this summer between 6,850 and say 6,900 would not be outside the realm of possibility,” he said, adding that “a 10 to 15% pullback would not be out of the ordinary.” The S&P 500 currently trades around 7,400. The analyst who called NVIDIA in 2010 just named his top 10 stocks and Invesco QQQ Trust wasn’t one of them. Get them here FREE. Several momentum indicators support the overheating argument. The S&P 500’s 14-day RSI closed at 75.5 on May 8 and has now remained above the traditional overbought threshold of 70 for more than a week. The Nasdaq-100 has surged 17.35% over the past month alone, while the broader market is up more than 9% in the same stretch. Roberts also pointed to his own internal overextension gauge for technology stocks, which recently hit 0.93 on a scale capped at 1.0. In his framework, that suggests positioning and momentum have become stretched enough that even strong fundamentals may not prevent a reset. Why Roberts Is Trimming Mega-Cap Winners Roberts trimmed Google and Microsoft after their recent strength and rotated proceeds into RTX (formerly Raytheon Technologies) and Eli Lilly as defensive candidates. Alphabet (NASDAQ:GOOGL) posted Q1 revenue of $109.90B with Google Cloud up 63% YoY, and Microsoft (NASDAQ:MSFT) cited an AI run rate of $37 billion, up 123% YoY. Both have been long-term winners and will remain long-term holdings. Roberts’ defensive picks tell the rotation story. RTX (NYSE:RTX) trades at a forward P/E of 25 after a 13.46% one-month pullback. Eli Lilly (NYSE:LLY) is down 11.6% YTD even after a Q1 revenue beat of 55.5% YoY. The Rotation Underneath the Surface Host Adam Taggart added another layer to the discussion by focusing on how market-cap weighting changes the impact of sector rotation beneath the surface. “Capital shifting from one side to the other is not necessarily a zero-sum game because of the market weighting dynamics,” Taggart said. If capital rotates out of trillion-dollar technology stocks and into smaller sectors like energy or healthcare, the broader index can still decline even while money remains invested elsewhere in the market. That dynamic creates a more difficult environment for passive index investors because the benchmark itself may weaken despite strength in select sectors. Active managers, meanwhile, gain opportunities to outperform through rotation. Roberts Sees a Reset, Not a Collapse Roberts closed by tying the market setup back to the broader economy. “Things for the average American have not gotten a whole lot better, even though the economy is doing better at the headline and the stock market is just going off to the moon,” he said. Other indicators also suggest complacency has returned quickly. The VIX recently fell 33.7% over the past month to 17.08, while the 10Y-2Y Treasury spread sits near the low end of its recent range. Importantly, Roberts is not calling for the end of the bull market. His argument is that the market may simply need a reset after becoming too stretched too quickly. In that framework, a 10% to 15% pullback would represent a routine correction inside a longer-term uptrend rather than the start of a broader collapse. The analyst who called NVIDIA in 2010 just named his top 10 AI stocks This analyst’s 2025 picks are up 106% on average. He just named his top 10 stocks to buy in 2026. Get them here FREE.
