Citadel's Rubner says technical reset complete as 9 of 10 indicators improve

The S&P 500 enters earnings season with 9 of 10 market indicators improved, Citadel Securities said, as retail demand stays resilient and valuations compress.

"The market we are entering is fundamentally different from the one we exited two weeks ago," Scott Rubner, chief equity and derivatives strategist at Citadel Securities, said in a July 13 report.

July retail net buying ranks as the second-strongest month since January 2020 and the strongest July on record, with average daily net purchases running about 3.2 times the historical monthly average. July 1 marked the largest single-day net buying of momentum pairs on the firm's platform, reaching nearly 12 times the trailing one-year average. Leveraged ETF assets under management have contracted about 10% to $198 billion, reducing systematic rebalancing flows, while one-month equity financing spreads have narrowed to about 60 basis points above SOFR from a recent peak of 138 basis points.

The remaining question is whether companies can deliver on earnings expectations. Consensus projects S&P 500 second-quarter earnings per share growth of 22.4% year over year, which would rank among the strongest readings outside of major recession recoveries. The final week of July will be the "Super Bowl" of Q2 earnings, with about 36% of the S&P 500 and 33% of the Nasdaq 100 by weight reporting, including four of the Magnificent Seven.

Market leadership is broadening beneath the surface. The S&P 500 has gained about 1% month to date even as technology stocks lagged, with gains driven by communication services and financials — sectors that underperformed during the first half of 2026. Since the start of June, 9 of the 14 S&P 500 down days saw a majority of constituents finish higher, compared with 32% over the past year. On the last 20 selloffs, an average of 239 constituents finished higher, nearly double the 20-year average of 133.

Semiconductor earnings have become an index-level event. The sector now accounts for about 18% of the S&P 500, up from 3% a decade ago and 5% five years ago. The average three-month implied volatility across the 10 largest semiconductor companies has more than doubled to about 73% from 29% in 2016. Unlike most industries, semiconductor companies report throughout the earnings calendar rather than in a single concentrated week, extending event risk across the remainder of July and through August.

Valuations have become a tailwind rather than a headwind. The S&P 500 information technology sector, the Nasdaq 100, and the S&P 500 semiconductor industry all trade below their respective 10-year average forward price-to-earnings multiples, even as the broad index sits within 1% of its all-time high. The corporate buyback window is also beginning to reopen, bringing the market's largest structural buyer back into equities.

Hedging demand remains concentrated in individual factors rather than the broad market. The S&P 500 one-month 25-delta put/call skew sits at just the 10th percentile versus the past year, while the SOX equivalent is at the 94th percentile. The spread between VIXEQ and VIX reached a record high, and implied correlations are near record lows — a market defined by stock selection rather than macro beta.

This article is for informational purposes only and does not constitute investment advice.