Beyond parabolic: NYFANG mimics August 2020 tech fever

Recall the August 2020 tech mania?

NYFANG has gone beyond parabolic. RSI is at extremely elevated levels. Last time we saw a similar panic to buy tech, and we reached overbought levels, was during the August 2020 tech melt up. Those overbought levels were corrected, but tech took out new highs quickly...and back then there "was" no AI around.

Source: Refinitiv


Of manias and crashes

Watch spot up, volatility up in tech closely. We have more to go if we are to reach extreme behavior of volatility markets, but this is what we saw before we topped out back in late 2021, although volatilities were more extreme back then.

Source: Refinitiv


GS: Overwriting those semis start to look compelling

2 semis names on the top 5 list of GS "short term call overwriting" screen. Strategy: sell June calls 8% out and collect almost 3%...

Source: GS derivs



"Monetary liquidity is set to fall sharply over the next 6 months, and this will likely drive major equity indices lower...Equities have had – and continue to have – a strong correlation to monetary liquidity, and this drain in reserves could push stocks down 7 to 10% based on historical relationships seen over the last few years. And in the US, the impact could be even greater this time since this reduction in the quantity of money may also come with an increase in the price of money – i.e. yields in money markets may rise given the cash drain. This could put pressure on bank and investor funding costs, with potential negative implications for broader equity markets." (MS QDS)

Tracking reserves

Left is Fed reserves, right is G4 reserves. GS recommends NASDAQ put spreads as a relatively cheap hedge for the upcoming liquidity withdrawal.

Source: GS


On factor moves – it feels like January/ February soft landing rally déjà vu

While one would have thought that a shift towards higher for longer narrative should result in weakness in Growth as a factor, Growth has in fact outperformed this past week (+3%) and YTD (+16%). One needs to look no further than the chart below between QQQ and KRE. 

Source: Morgan Stanley


Well-supported Bull

1. The Bloomberg Economic Surprise Index is at its highest level in over a year:

2. Earnings Surprises ended the season at +6.6% and Sales at +2.5%.  

Source: Bloomberg


US GDP growth trend line

Back to the (negative) trend line...

Source: Macro Strategy



...but do we get "overboughter" as investors must chase the AI story to show they have put money to work?

Source: Refinitiv


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