Weekly Macro Analysis 15.12.24

Market Rotation

This Bull market continues to be driven by powerful isolated themes, the leadership has shifted majorly, NVDA is slacking but AMZN, TSLA, PLTR and MSTR have completely taken over.

I have been big on Consumer Discretionary, Crypto and Small Caps coming into the fourth quarter.

Small Caps have failed to live up to my expectations, providing one disappointment after the other. Unless IWM gets above 234 again on at least a daily close, it is dead to me.

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Bull Market Ratios:

These are some of my Bull market sustainability ratios, that should capture rotation from Risk On to Risk Off sectors, or rotation within Risk On sectors:

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XLY/XLP - This most important Bull Market Ratio keeps climbing higher.

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IWF/IWD - Growth vs Value doing the same thing!

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NQ/Gold - Had some trouble on monday and tuesday but bounced back strong.

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What do those ratios tell us right now:

Still Bullish.

We are overextended in some leaders, but other could pick up the pace again, like Semiconductors or MSTR and COIN.

It is still not wise to bet against the Bull market.

However I will be watching very closely what happens to the VIX as we see the next rotation.

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Warning signs:

On monday we saw a big move up in China as well as some related commodities and at the same time the VIX ripped higher. This was surprising to me as the damage on the indices wasn´t big enough to warrant such a panic.

We then slowly shook off the volatility and the gains in china and metals also disappeared.

However, all of those pulled into support…

VIX - still potentially dangerous:

HSI - China… pulling into support:

Copper - Same thing, breakout and then pull back, without losing the ingnition candle:

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So overall, instead of shorting or buying puts on the bull market leaders SPY and QQQ, I have been adding EEM to my book. They could potentially buffer the downside in the big indices and I am bullish on EM in general for Q1 of next year.

I also have taken profits on TSLA, AMZN and XLY. But still remain overweight there.

I am completely out of Small Caps until IWM 234.

Crypto is unchanged. Volatiltiy is to be expected, I had been buying COIN, HUT and BTC, along with some other stuff.

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