Everything Devaluing Against Tech Or...
Tech is extended
QQQ is way up in the rankings. It doesn’t go much higher except in acute situations. The only times QQQ went higher in ST momentum in recent years was in March 2023 (when financials sank the other indexes) and in June 2024 (Nvidia/Mag 7 melt-up that gave way to the July plunge). It has gone much higher in LT momentum though. To get into another similar setup would require either tech running up along or tech holding up as other sectors such as financials lead a collapse.
Aside from tech, almost all of which is semiconductors and AI funds or proxies of them (South Korea EWY), there are alternative energy and oil funds at the top of ST rankings. Not energy equity. Those shares are already sliding out. On the LT charts, they’re barely hanging on to top-10 spots.
China’s economic data was a broad miss. Retail sales down, fixed asset investment negative, industrial production missed big. How much of that is downstream from the Iran war?
China promised to buy more soybeans and Boeing jets again. A nothingburger economically.
Nothing major about Iran was announced. In a world of resource constraints, China, Russia and the U.S. are all better able to manage thanks to either resources or superior economic efficiency. China’s main concern is stability. They locked the country down for three years to advance Made in China 2025. A global recession they can blame on Trump is another gift for them to implement highly nationalistic policies that cause pain under cover of an external excuse.
Everyone is talking about rates again. I noted on Friday they’re back to where a breakout could be imminent.
Here’s the 10-year yield and crude oil. No college degree required to understand what’s happening. No foreign policy or economic experience needed to understand the decision tree Trump faces.
Markets ran up on hope that Trump only cares about the Dow Jones Industrial Average going up. He did say he sees something like a 25-percent drop in the stock market as worth it though, to keep Iran from having a nuclear weapon. The stock market has largely priced in TACO. Energy and rates are not sure. Formula for disaster: Trump actually believes the downside risk is only 25 percent.
The $670 area looks like a “luck it stopped there” spot for the bulls.
Nvidia earnings are Wednesday, May 20 after hours.
SpaceX has a preliminary date for its IPO: Friday, June 12.
These are the last two big items on deck the could plausibly keep the market from experiencing a major sell-off. A brief plunge is possible though, the pause that refreshes the rally. The market remains in a corrective setup.
The move up screams for a violent reversal, but everyone is looking for one. Rates and oil too are widely discussed. Another round of kinetic action in the Middle East is the worst case scenario for the market since there's no room mitigating factor. Whereas a pullback in tech today is being offset by accumulation in several sectors.
Looming in the background is the gap in SMH near $400 per share, a 25 percent reversal from the $540 level that would mark the start of more downside risk.