Nasdaq melt-up right on time, Everyone’s Short Gold, What goes up…
Hey it’s Kieran! Another week in the markets is upon us, so here are the key events to be aware of, and the most interesting Macro research coming out of the investment banks. I’ll hopefully speak to you this week in the Traderseed Trading Challenges and as ever, if you have any questions, just leave me a comment below.
Weekly Watchlist
After last week’s softer than expected US Inflation number and subsequent risk rally, this week we’ll see how the US Consumer is holding up when Retail Sales numbers are released on Wednesday. We’ll also see October data on producer price inflation, industrial production, housing starts and existing home sales.
Fallout from the crypto exchange FTX will likely continue to make headlines, and should be watched closely to gauge the extent of contagion. This highly leveraged section of the financial system is unravelling by the day and could cause devastation to market participants inside and outside the crypto space.
The Macro View
Nasdaq Melt-up. Right on time. Seasonality again working like magic. Based on the last 36 years, this is the normal seasonal pattern.
Nasdaq looking cheap. The median company in the Nasdaq 100 now has a Price to Sales ratio of 4.2x (down from 8.5x a year ago), the lowest we’ve seen since 2016.
BofA “Bull & Bear” remains at 0. Despite the tech rally and softer valuations, market sentiment remains rooted to zero, in Extreme Bear territory. This likely means that most market participants are still short stocks and missed the rally. All the ingredients for a short squeeze are in place.
What goes up, must come down. Asset bubbles since the 1970’s. Crypto is no different…
Crypto market cap from 3tn to 0.8tn. A zoomed-in look at the crypto bubble shows huge wealth destruction. Mostly to retail this time.
Short Gold. Of all the post CPI moves last week, Gold looked the most impressive. It’s interesting to note is that gold longs are nowhere to be seen, and managed money is still positioned short. Short squeeze anyone?
Freight Rates Collapsing. As illustrated by the CPI print last week, we see continued supply chain normalisation as demand weakens and spending shifts back towards services. Shipping demand continues to collapse with ocean rates down another c. 20% over the last month. A leading indicator and a welcome development for inflation ahead of the holiday season.
I hope you found this interesting and useful. I write this newsletter every Monday so make sure to follow me! As ever, keep your risk management top of mind, trade safe, and stay nimble out there.
Have a good week!
Kieran
www.traderseed.io
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