Interesting call out of Wall Street firm Nomura via Zerohedge, indicating the deflation trade is over and the reflation trade will now lead the market higher. They base this primarily off of the nascent rotation out of Tech/Momentum and into cyclicals. The Zerohedge article indicates that a spike in Treasury bond yields is imminent. Unfortunately for that delusion, below we see that since the glue fumes from the March mega stimulus wore off, bond yields haven't bought into ANY part of this reflationary circle jerk.
Meanwhile, cyclical stocks are front-running the second stimulus bill, which will be substantially smaller:
There are three scenarios on the table right now: One, Tech/Momo is merely taking a breather and about to sprint higher. The second scenario is the Nomura rotation, which according to them will see cyclicals lead the market higher. Or three, my scenario, in which everything explodes at the same time.
Here we see the first scenario via Momo Tech is hanging by a thread and it's along way down to the 200 dma:
As far as the second sceario goes, I suggest it is merely a rotational headfake due to the NFP report and the impending stimulus plink.
Here we see small caps now as overbought (RSI top pane) as they were on Monday June 8th, the day after the NFP (Non-Farm Payrolls) report.
Bueller?
My hypothesis is that the reason we didn't see epic volatility in March is because during that major selloff, there was a massive rotation from cyclicals to growth/momentum stocks.
Specifically, the stay-at-home bubble.
I suggest that when the four largest MAGA Tech stocks which now account for a record share of S&P 500 gains year to date, go bidless, that event won't be accretive to market returns.
Meaning, I don't see Dave Portnoy's airline stocks leading the market higher.
In the spirit of maximum Ponzi, the gambling stocks are all going late stage parabolic.
The question on the table is when did we last see the entire market go bidless at the same time. And the answer was during the run up to the tax cut in 2018. When the tax cut went into effect, the momo stocks AND the cyclicals imploded at the same time.
What this would mean from a market sentiment standpoint at this juncture, is third wave down at all degrees of Ponzi trend.
What I am trying to say is that this is the final rotation.
And, more importantly, THERE ARE NO SAFE HAVENS in risk assets. Shiny or otherwise.
Cash is king.
