Milton Berg: I Have Evidence Market Has Likely Bottomed | Why Milton’s Long Semis, Korea, Nasdaq, and More (With Caveats), and Why He Thinks Gold has made a Multi-year Top

Milton Berg covered his shorts on July 29th and 30th and moved to 100% long across multiple indices by late July. His current allocation is approximately 50% long S&P 500 via SPY, 20% long the Philadelphia Semiconductor Index via SOX, 10% long Nasdaq 100, nearly 10% long Russell 2000, 5% long S&P mid caps, and 5% long Korea via EWY. His conviction rests on several converging signals: the KOSPI declined 43.93% in 27 days before bottoming on July 29th, the Philadelphia Semiconductor Index fell 28.73% from its June peak, the S&P 500 did not make a new low relative to its June low creating a positive divergence, the five-day rate of change following the low was the greatest in over a year across two major indices, and the date coincided with a cycle turning point Berg had identified in advance.

Berg includes Korea because the KOSPI is approximately 50% semiconductor-adjacent, making it closely correlated to the semiconductor and Nasdaq AI hardware trade. He views the semiconductor index as still 15.57% below its June 22nd peak and the Nasdaq 100 as 3.02% below its June 2nd high, meaning both remain in recovery mode rather than at new highs.

Berg is bullish but attaches meaningful caveats. He notes that crash lows are historically retested rather than forming V-bottoms, citing the 1987 crash where the S&P fell 45.94% and came within a percentage point of its low two months later. He believes the KOSPI and semiconductor index may rally to a short-term peak near current levels and then trade back down toward their lows within one to two months. If the KOSPI makes a new intraday low on a retest, Berg says that increases the probability the initial rally was only the first leg of a continuing bear market. He also flags a gap in the Nasdaq 100 that appeared four days after the July 29th low as potentially exhaustive rather than a breakaway gap, which he treats as a negative sign. The S&P 500 recently broke to a new all-time high on an upside gap, which Berg treats as a bullish impulsive gap signal, though he rates it only 50% long given broader uncertainty.

Berg generated at least 34 buy signals in late March and early April with median S&P 500 projections ranging from 8,200 to over 10,000. Across all April signals, his aggregate minimum expected return projects the S&P to 8,286.21, a gain of approximately 6.82%, and the median of maximum expected returns projects to 8,958.23, a gain of approximately 15.49%. One specific trigger was the Philadelphia Semiconductor Index posting a 10-day rate of change exceeding 20% while the S&P 500 was at a two-year high, a condition that preceded a 28% gain in the final leg before the 1987 crash. On March 31st, the SP400 was down five consecutive five-day segments, the Russell 2000 and S&P 500 were each down five weeks in a row, and advance-decline ratios on the SP400, SP500, and SP600 were all greater than 4 to 1, a combination that had previously occurred only once in history at the COVID market low. The Philadelphia Semiconductor Index subsequently gained over 100% and the S&P technology index gained over 90% from the March 30th lows.

Berg sold his personal gold and silver holdings on or near the day gold peaked in early February and is currently not long either metal. He views gold as having made a major multi-year top rather than a simple trading top, drawing on the 1980 gold peak after which gold entered a 20-year bear market even as inflation doubled over that period. At the time of the February peak, gold relative to crude oil, housing, soybeans, and virtually every other commodity was at historically extreme highs, which he treats as a bearish structural condition. He predicts gold and silver are likely to produce retracement rallies within an ongoing long-term bear market but will not make new highs. He rejects the cup and handle interpretation suggesting silver could reach 3,000, arguing that pattern applies to stocks with retained earnings and is not valid for commodities.

Berg argues that bear markets typically do not begin until the Federal Reserve tightens, and the Fed has not yet done so. He predicts incoming Fed chair Kevin Walsh will most likely tighten and will likely use quantitative tightening in addition to raising rates. Despite the S&P 500 reaching a new all-time high, Berg says that high is most likely not the final peak, though he acknowledges it is possible. He notes the Buffett indicator of market cap to GDP is more overvalued than at any point in history and that margin debt relative to cash balances is at its highest level ever, but emphasizes that an overvaluation background does not mean the bull market has ended. He also notes that when the S&P made its new all-time high, only 21 stocks generated new all-time highs, a very low reading he identifies as a negative divergence comparable to the 16 new highs recorded near the dot-com peak on March 10, 2000.