Capitulation or Crash

My entire thesis posted publicly in JANUARY (after warning clients in early Nov 2021) has played out:

• SPX $3800

• Nasdaq Underperformance

• Energy As Alpha

• USD not done going up

• Bonds not done going down

Is It Safe:

I got gold wrong. Otherwise, all has worked out.

So why do I bring this up now that SPX approaches $3800? Do we capitulated soon and bounce hard?

Let's go back before we go forward...My "Bonds Topped" call in August 2020 was technical, but why I could see that inflation and yields would be more than sticky. They are now seen as entrenched.
Fed waited until November 2021 to remove the word "transient" from its vocab in regards to inflation, confirming what I already knew since summer 2020: Inflation was structural not extraneous.

My "Growth to Value Rotation" call triggered in September 2020 then confirmed in a double top November 2021. This was the biggest Tell for my higher Oil and Energy thesis - first to outperform growth and later to trigger energy crisis. With Oil & Gas holding/moving higher, I think we are about to embark on a much more risky global economic and trading backdrop. Trading volatile markets can be dangerous even if you have the direction right.

My "Tech Wreck" calls have been early and often.  Lower prices were slow to appear in indices, but selling under the surface was obvious to see in my intermarket analysis across many speculative 'growth' sectors. They still haven't bottomed.

The 13 years of outperformance in Nasdaq has come to an end as I predicted in December 2021. This view is now seen far and wide. The result? Folks aren't hedging the market correction. They are just selling. Not sure people realize how dangerous the structure is under the surface but we don't even have enough put buying to put in a tradable bottom yet.

Bigger picture, this secular Tech Wreck likely takes years to stabilize. I stated back in January that I didn't think tech would go back to their all-time-highs and that included  mega cap tech. I'm only more convicted now.

Safety plays are far and few between. US dollars are the obvious 'risk-off' rotation and as such has been bid strongly. Gold is tied to Russian Rubles and as RUB advances, gold crashes. Another thought:
"They" can't let gold rise with the USD or else systems outside US will collapse. So with that, how long can they keep gold down?! Will a gold spike signify conflict in the world? China-Taiwan currencies have been on fire, and not in a good way!

VIX has been neutered and bonds are in a bear market. Neither is a safe hedge. Bitcoin is but a bastion of busted billionaires. And commodities are hard to trade for the masses and massively controlled by the whims of China. China is more concerned about controlling Covid then contagion from an equity sell-off in hard assets which they buy more of than any other nation in the world. It is also not shocking that as energy costs soar, so too do their lockdowns. Is it the virus they fear or demand? One way to crush both (or hope to), is manipulate the auction of supply and demand by removing demand.

Markets have no bid as Fed has no plans to intervene. That leaves no safe place to go other than dollars and select commodities and cyclical plays.

It bears repeating:

Markets crash from oversold not overbought conditions.

With that, many are looking for the capitulatory low to buy. And I would remind like I did back in January:
Timing Tops and Bottoms: Are We At One Now?

Yes, eager buyers may show up to buy what’s on sale, but they aren’t picking a bottom; they are trying to make it. Let them.

Everyone is looking for the capitulatory low to buy, but what if we crash instead? Are you ready for that possibility?

Be ready.