In the past few days, something remarkable has been happening. On one side, the markets are on fire. Record highs in the S&P 500, record highs in the Dow, Palantir soaring 29% in a single day, and chip stocks climbing as if there were no limits.
On the other side, there is one man warning that we may be approaching a major market top and could see a decline similar to the crash of 1987.
His name is Michael Burry. Yes, the same investor made famous by The Big Short.
Tuesday was explosive.
The S&P 500 gained 1.79% to close at 7,736.52, marking its first record close since June. The Nasdaq jumped 2.59% to 26,584.99, while the Dow surged 907 points, or 1.71%, ending at 54,085.88.
What fueled the rally? Two things.
First, corporate earnings.
Palantir reported results that CEO Alex Karp described as "otherworldly." The stock posted its best day in two years, soaring 29%.
Caterpillar also beat expectations, raised its revenue outlook, and climbed 5%, helping lead the Dow higher. Micron rose more than 7%, while Marvell gained nearly 13%.
One statistic stands out: more than 84% of S&P 500 companies that have reported earnings have beaten analyst expectations, according to FactSet.
Second, oil prices.
Treasury Secretary Scott Bessent told CNBC that the United States is in talks with Iran and that an agreement to reopen the Strait of Hormuz could be possible.
That alone was enough to send oil sharply lower. WTI crude fell 5.69% to $75.77 per barrel, while Brent crude dropped 5.26% to $79.36.
As Thierry Wizman of Macquarie Group put it:
"Watching the stock market surge over the last three sessions, you wouldn't think anything was wrong in the world."
Then on Wednesday, stocks continued to move higher.
This time, however, the catalyst was a weaker labor report. ADP reported that the private sector added just 44,000 jobs in July, well below expectations of 75,000 and down from 98,000 in June.
Amid all the excitement, Michael Burry published a post on his Substack.
"I continue to believe it is possible that we are near a major market top, and that a 1987-style decline is possible. However, the S&P 500 making new highs will likely attract fresh money into the market."
A decline like 1987.
On October 19, 1987, the infamous Black Monday, the Dow Jones plunged 22.6% in a single day, which remains the worst one-day decline in its history.
Why is he saying this now?
His argument is more technical than it first appears.
According to Burry, when markets rise while volatility falls, volatility-targeting funds are forced to increase leverage. Other momentum-driven strategies also begin adding leverage.
In simple terms, there are enormous funds that automatically buy when markets are calm. The lower fear goes, the more they borrow and buy.
Meanwhile, the VIX volatility index has fallen 15% over the last five trading sessions. Although it rose 4% on Tuesday to 16.5, it remains relatively low.
The problem is that these positions can reverse very quickly if conditions change.
When that happens, declines tend to be sudden rather than gradual.
Burry has also remained one of the most skeptical voices regarding the AI boom. He argues that demand for AI infrastructure is being supported by financing arrangements that may ultimately prove unsustainable.
What makes all of this more interesting is that Burry is backing up his views with real money.
He currently holds short positions against the semiconductor sector, Micron, Nvidia, Caterpillar, Palantir, Tesla, and Applied Materials.
In other words, he is betting against many of the exact stocks that have surged this week.
According to Burry, all of these positions are profitable except one: his bet against Nvidia.
He has also made several portfolio changes.
He exited long positions and call options on Microsoft. He closed shorts and put positions on Oracle. He also closed his January 2026 Palantir puts, although he remains short the stock itself.
Most importantly, he rolled his bearish Nvidia puts out to June 2027 and extended his short position against the Nasdaq through February 2027.
What does that mean?
It suggests he is not making a short-term prediction. He is giving himself time, potentially until 2027, for his thesis to play out.
One of his most important comments was this:
"Shorting is not for everyone. I have to short. Most people should not."
At the same time, Burry pointed to a statistic from Jonathan Krinsky of BTIG Research.
The S&P 500 recently gained 5% in just four trading sessions while reaching a new all-time high.
That has happened only three other times during the last 30 years.
Those dates were March 21, 2000, right at the peak of the dot-com bubble, April 23, 1999, when some of the first dot-com companies began collapsing, and November 9, 2020.
There is, however, a major counterargument.
Many market participants responded immediately.
Kip Herriage of Vertical Research Advisory wrote on X:
"Unless aliens invade, in a bull market of this breadth and strength, Burry's short positions will be destroyed by 2027. We are in a generational bull market that could easily surpass the dot-com era and continue deep into the 2030s."
It is also worth remembering that Burry himself admitted in May that he has become something of a meme because of the number of crashes he has predicted.
At the same time, he points out that he correctly identified major turning points in 2000, 2007, 2019, the meme-stock collapse in 2021, and the banking-stock rally in 2023.
So who is right?
Nobody knows.
And that is the only thing we can say with certainty.
