Investors Disorientation: Will it stabilizes?
$NASDAQ (NASDAQ.US)$ $S&P 500 Index (.SPX.US)$ Just last month, we highlighted the risk of highly concentrated sectors in this post and predicted a sell-off: High Concentration Risk: Why this stack of cards will fall really hard?
Little do we expect this movement causes a broad sell-off in the whole market.
As we have said last week, the broad dip last week was mainly caused by investors disorientation as these 5 key events cause mass confusion among traders:
1. Profit-taking in highly concentrated sectors (High Concentration Risk: Why this stack of cards will fall really hard?) $SanDisk (SNDK.US)$ $Micron Technology (MU.US)$ $Western Digital (WDC.US)$ $Applied Materials (AMAT.US)$ $ASML Holding (ASML.US)$ $USA Rare Earth (USAR.US)$ $MP Materials (MP.US)$ $Energy Fuels (UUUU.US)$
2. Profit-taking in highly leveraged Gold/Silver trade [[Accurate Prediction] Strong dip-buying session after some traders reassess and pointed out fake news of Kevin Warsh] $Gold Futures (APR6) (GCmain.US)$ $Silver Futures (MAY6) (SImain.US)$
3. Kevin Warsh, Rate cuts and unemployment uncertainties ([Accurate Prediction] Memory/Storage stocks and other heavily concentrated sectors enter profit-taking as Market overreacted to Kevin Warsh’s fake news) small/med caps and crypto are particularly sensitive to this. As the job market data wasn’t that ideal, the market was worried about it. However, the worries were overdone as the Feds did not reject the idea of cutting rates. Future rate cuts prospects tend to be pessimistic nowadays.
4. Indonesia Stock Market Crash: Global investors will expect some pressure from this even if it isn’t direct impact.
5. Crypto sell-off: $Coinbase (COIN.US)$ $Strategy (MSTR.US)$ $Bitmine Immersion Technologies (BMNR.US)$ $Ethereum (ETH.CC)$
BTC sell-off isn’t a collapse of the crypto system, but rather a test of its robustness and reliability. It is a necessary test and it’s not like we haven’t seen something like that before. When we used to use the Gold Standard, that has also resulted in several bank run in the past until we change to the current monetary system. Even after we abolished the gold standard, gold prices did not fall but become even more robust and highly valued over the years.
Crypto has already survived crypto winter once. If it can survive the current rout and continue to grow in value, it will only make it more attractive due to its increased economic resilience. These characteristics can only be attained through the test of time.
6. Software rout ([Baseless Speculations] Software will be disrupted by AI): $NVIDIA (NVDA.US)$ $Advanced Micro Devices (AMD.US)$ $Salesforce (CRM.US)$ $Snowflake (SNOW.US)$ $Figma Inc (FIG.US)$
The first 4 events are the key events that causes wide-spread irrational fears. The uncertainties of rate-cuts and job market causes a massive sell-off in crypto. The software sell-off was irrational, but it is also exacerbated by disorientation from these major liquidity events.
Overall, we can saw liquidity run in every segment. Each fear was isolated:
- Tech stocks (software fear)
- Gold/Silver (high leveraged)
- Rare-earth/Memory/Storage (highly concentrated)
- Small/med caps (interest rates uncertainties)
- Crypto (interest rates uncertainties) But when we put them together, nowhere was safe and causes everyone not to know where to put their money so everyone just rush for liquidity.
2. Profit-taking in highly leveraged Gold/Silver trade [[Accurate Prediction] Strong dip-buying session after some traders reassess and pointed out fake news of Kevin Warsh] $Gold Futures (APR6) (GCmain.US)$ $Silver Futures (MAY6) (SImain.US)$
3. Kevin Warsh, Rate cuts and unemployment uncertainties ([Accurate Prediction] Memory/Storage stocks and other heavily concentrated sectors enter profit-taking as Market overreacted to Kevin Warsh’s fake news) small/med caps and crypto are particularly sensitive to this. As the job market data wasn’t that ideal, the market was worried about it. However, the worries were overdone as the Feds did not reject the idea of cutting rates. Future rate cuts prospects tend to be pessimistic nowadays.
4. Indonesia Stock Market Crash: Global investors will expect some pressure from this even if it isn’t direct impact.
5. Crypto sell-off: $Coinbase (COIN.US)$ $Strategy (MSTR.US)$ $Bitmine Immersion Technologies (BMNR.US)$ $Ethereum (ETH.CC)$
BTC sell-off isn’t a collapse of the crypto system, but rather a test of its robustness and reliability. It is a necessary test and it’s not like we haven’t seen something like that before. When we used to use the Gold Standard, that has also resulted in several bank run in the past until we change to the current monetary system. Even after we abolished the gold standard, gold prices did not fall but become even more robust and highly valued over the years.
Crypto has already survived crypto winter once. If it can survive the current rout and continue to grow in value, it will only make it more attractive due to its increased economic resilience. These characteristics can only be attained through the test of time.
6. Software rout ([Baseless Speculations] Software will be disrupted by AI): $NVIDIA (NVDA.US)$ $Advanced Micro Devices (AMD.US)$ $Salesforce (CRM.US)$ $Snowflake (SNOW.US)$ $Figma Inc (FIG.US)$
The first 4 events are the key events that causes wide-spread irrational fears. The uncertainties of rate-cuts and job market causes a massive sell-off in crypto. The software sell-off was irrational, but it is also exacerbated by disorientation from these major liquidity events.
Overall, we can saw liquidity run in every segment. Each fear was isolated:
- Tech stocks (software fear)
- Gold/Silver (high leveraged)
- Rare-earth/Memory/Storage (highly concentrated)
- Small/med caps (interest rates uncertainties)
- Crypto (interest rates uncertainties) But when we put them together, nowhere was safe and causes everyone not to know where to put their money so everyone just rush for liquidity.
There are also other factors of uncertainties that make traders more edgy than usual:
- 4th year after 3 years of gains for the market: The market has been seeing gains for the past 3 years, and there are alot of investors who speculate a recession cycle is coming 7-10 years after the one in 2020 (Covid recession). So it could be anytime between 2027 to 2030. And with 3 consecutive years of gains, traders have been really careful since the start of the year and that’s one of the reasons why we are seeing sideway movements in the market.
Even for us, this account’s trading activities have dropped from V3 last year to V1 this year due to more conservative positioning.
- 4th year after 3 years of gains for the market: The market has been seeing gains for the past 3 years, and there are alot of investors who speculate a recession cycle is coming 7-10 years after the one in 2020 (Covid recession). So it could be anytime between 2027 to 2030. And with 3 consecutive years of gains, traders have been really careful since the start of the year and that’s one of the reasons why we are seeing sideway movements in the market.
Even for us, this account’s trading activities have dropped from V3 last year to V1 this year due to more conservative positioning.
- Mid-term elections: Mid-term elections is one of the key concerns especially in Crypto. This has to do with the Clarity Act because if it fails to pass before mid-term, it might face more obstacles if Republicans would to lose some control.
However, we think that the fear and concerns are overdone. Despite these uncertainties, we still think that SPX and Nasdaq will continue to rally especially when there is more clarity in the 2nd half of the year. The current disorientation is caused by alot of uncertainties when it comes to the overall outlook for this year.
This week, after the dip-buying on Friday, we still expect the market to be cautious, and think that retail investors should be careful in assessing the market this week.
Expect high-concentrated sectors to still be the defensive sector as investors will still be selective.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Eugh : maybe at the end of February?
RomeoMustDie : big rally end of march