All Equities Are The Same In A Selloff
All of a sudden inflation is looking transitory. Energy and commodities are rolling over, while autos have already peaked and bond yields are falling. The market is fine.
Futures are looking grim heading into the week but there are nice risk/reward setups across the board with a supportive market backdrop. Remember, most “investors & money managers” are unskilled and tend to regurgitate the headlines that they read to others, like birds.
Bottom line:
The inflation headline narrative is an overcrowded trade. All of a sudden inflation is already starting to look transitory. Energy and commodities are rolling over, while autos have already peaked and bond yields are falling.
The tapering of asset purchases and the yield curve are in focus. Last week we made it aware of the rotation into cyclicals that was going to continue. All the old-head stocks (ex. PEP, KO) are ripping higher but that means nothing. The “risk-on” assets like Bitcoin and tech stocks are the support beam for this fabricated market. If they can’t hold, nothing will.
What to watch:
Look for the Nasdaq to start outperforming before adding exposure equities
Dollar strength remains a headwind for commodities/yields/inflation/cyclicals
We think TWTR and ARKG pose for a potentially nice risk/reward play
Never forget, 80% of liquid M1 Money supply was created in the last 2 YEARS.
The middle of the yield curve continues to be a “Bull Flattener”, which is a nice tailwind for equities.
Silver is in a great spot to start outperforming gold.
S&P 500 still trading in the range while VIX continues to creep higher. That is not a bad scenario to have.
Reversal with a strong risk/reward. ARKG
It is going to be Twitter vs Reddit & TWTR is looking better.
Bitcoin is trading cautiously tight. This can pop in either direction quick.
Remember this chart when you try and buy “weekly call options” on beaten down names this week. Vol funds are selling those expensive Calls to noob retail traders like you.
