Weekly Macro Analysis 16.06.24
Ready to launch?
This week, the market aka SPY and QQQ confirmed the breakout, while most other equities sold off.
The charts of Big Tech look as good as ever, with breakouts from AAPL, NFLX and MSFT.
There are however a few warning signs, we have a never before seen bifurcation of the stock market, with Big Tech going up, pulling the SPY and QQQ with it, and everything else going down:
This is QQQ (Tech Index) vs IWM (Small Caps):
Now, let me be perfectly clear about this, it is not, in any way bearish QQQ! It is making All Time Highs and that is bullish.
However there are signs for caution, rations that were supposed to be Risk On, breaking down and looking more bearish, like BTC vs QQQ:
Junk Bonds getting smashed against Government Long Bonds:
And to the most worrying one, SPY vs TLT getting rejected:
DJT (transports) getting smashed by XLU (Utilities):
All of this, means to me, that the markets are pricing in a recession, but are assuming Big Tech will be unfaced due to AI, or maybe their gigantic Cash Holdings and insane Earnings.
Big Tech seems to be priced to perfection. The rest of the markets is in a deep recession…
So what will resolve the bifurcation?
Recession getting priced out, because Rates will get cut early enough, so the economy won´t actually fall off a cliff… this might lead to an insane melt up across all equities.
Recession being priced into Big Tech, because maybe AI doesnt pay off as expected and Recession might actually hurt the Bottom Line of Big Tech.
In any case, I think shorting stocks here is a bad trade.
But in one of those cases, going long Long Bonds might be a great opportunity:
TLT has in my opinion broken out of its Downtrend and might have a Rally here.
This is trade, where I do not have to short stocks to make money on a recession call.