Six mega cap Tech stocks becoming the entire "market" has been conflated as a new bull market. You have to be brain dead to believe it, hence it's the new consensus...
Let's see, CPI tomorrow. FOMC Wednesday. ECB Thursday. BOJ Friday.
What could go wrong? Apparently nothing.
It appears that the combination of last week's debt deal and this week's Fed "pause" has created a FOMO melt-up as investors believe that monetary and fiscal policy are now at their back. Sadly, nothing could be further from the truth, because what gamblers are buying with both hands is a hard economic landing with minimal bailout.
Google searches for "bull market" are at a record high from 2004.
Note that gamblers were right in 2020 compliments of the massive Fed bailout. In 2008, they were four months early and took another -40% drawdown. This time, they are coming in at the end of the cycle. For maximum pain.
What you would expect after 15 years of non-stop monetary bailout - They have been conditioned to implode. Today's bullish pundits are using the post-2008 playbook which assumes just-in-time bailout.
Coming into this seminal "pause" week, Tech overweight has reached a new record high relative to the average stock. Investors today actually think that the average stock is going to "catch up" to the massively overbought Tech sector. Unfortunately, that's not what happened the last two times.
The pullback in August 2020 was mild (-15%) for the Tech sector. The pullback in December 2021 was a full scale bear market -35% for the Tech sector. Both times, the entire market fell at the same time. There were no safe havens.
Still, investors believe this 3rd and largest Tech mega bubble will be the bull market. Recall that the entire reason to buy Tech stocks in 2023 was due to the impending Fed pause which kept getting pushed later and later into the year. So, it could be priced in.
Here is where it gets interesting. Way back three years ago in June 2020 the entire "reflation" trade imploded. The rally was over until the 2020 election. From that point forward it was a Tech-only rally.
Now we see below that bank stocks this year imploded in March and have rallied back into June. Deja vu.
However, if you look at the chart above, you see the pre-election Tech crash in August 2020 is now aligned with the reflation peak of June 2020.
Everything is peaking at the same time. This time.
Here is what the sheeple are being told right now:
"Once stocks are greater than 20% off bear lows, did you know a year later stocks have never been lower?"
Since 1956, that is true.
However, in 1930, that was false. The signal was wrong when it had its most catastrophic failure.
It's called "data mining" and it is the last resort of today's trapped bulls.
And no, they don't see it coming.
