Michael Burry, the investor best known for The Big Short, said he continues to believe the market could be nearing a major top and potentially face a 1987-style crash despite the S&P 500 climbing to fresh record highs.

Burry said on Tuesday he is maintaining his bearish positions, adding that underlying momentum and volatility trends still point to the possibility of a sharp market reversal.

Rare Rally Mirrors Past Market Peaks

In a Substack post, Burry said the S&P 500 made new highs on Tuesday, while the equal-weight S&P 500 had already reached record levels. “The NASDAQ 100 is still some ways off its all-time high,” he said.

Citing data from BTIG’s Jonathan Krinsky, Burry said the “S&P 500 has surged 5% over four trading days to a new high only three times other than today.” Those instances came on March 21, 2000, near the peak of the tech, media and telecom bubble, April 23, 1999, around the time many dot-com stocks began to decline, and November 9, 2020.

Burry said, “What really matters is the SOX, and the Momentum trade,” adding that those trades were hit hard in July. He said the key question is whether they can regain market leadership, while pointing to the six-month, 30-minute chart of the SOXX ETF as showing momentum turning back to the upside.

Burry's Bearish Bets Stay In Place

Despite the market’s rally to new highs, Burry said he is keeping his bearish bets in place. “I continue to believe it is possible we are near a major top, and possible a 1987-type fall, but the S&P 500 making new highs likely will bring new money into the market. I continue to maintain my SOXX put position and short position in the equity.”

Burry said rising markets combined with falling volatility force volatility-targeting funds “to leverage up, and brings leverage from other momentum strategies into play.”

He added that the Goldman Sachs Momentum Pair Trade remains damaged after its historic run, while the VIX/VIXEQ remains at 12-year lows. According to Burry, many pod shops and volatility-targeting funds that were hurt during July are still “licking wounds,” even as subdued index volatility continues to mask substantial volatility beneath the surface.

Separately, Burry said he is working on the fourth installment of his “Heretic's Guide,” which will examine the earnings and regulatory filings of the five largest hyperscalers through a forensic analysis. He said the analysis is largely complete, with work continuing on the visuals and final prose.

SPY, QQQ, DIA: Stocktwits Retail Sentiment

On Tuesday, the S&P 500 ended 1.8% higher, while the Nasdaq 100 closed the session up 3.3% and the Dow Jones Industrial Average gained 1.7%. Among ETFs tracking the benchmark indexes, the  (SPY) rose 1.8%, the  (QQQ) finished 3.4% higher, and the  (DIA) added about 1.7%.

Retail sentiment on Stocktwits remained ‘bearish’ with ‘high’ message volumes for SPY, QQQ, and DIA.