This rebound does not yet qualify as a durable risk-on turn. It has many hallmarks of a positioning reset, not renewed conviction.
The scale of the bounce in the S&P 500 looks impressive on the surface, but the underlying signals are less convincing. Elevated implied volatility, below-average participation, and the sharp move in Goldman’s short-bias basket all point to short covering and mechanical flows, rather than long-only re-engagement. When rallies are led by what investors were forced to buy back, rather than what they want to own, follow-through tends to be fragile.
The AI angle matters here. The market is increasingly questioning winner-takes-most dynamics, especially in software, where pricing power, differentiation, and customer lock-in are far less assured than in AI infrastructure. That uncertainty caps multiple expansion and encourages tactical trading rather than sustained allocation.
So is this a dead cat bounce?
Not necessarily. It is better described as a tradable relief rally inside a broader consolidation, with asymmetric risks still skewed to the downside if macro or earnings disappoint.
Would I add stocks now?
Only selectively:
Add quality leaders with clear cash-flow visibility and balance-sheet strength.
Avoid crowded, narrative-driven software names where AI monetisation remains unproven.
Keep dry powder. A convincing uptrend requires improving breadth, falling volatility, and volume confirmation, none of which are in place yet.
In short, this is a market to scale, not chase. Treat strength as an opportunity to rebalance positioning, not as confirmation that the uncertainty has cleared.
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