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Zombieland.

"Very few people on the streets, everyone wearing face masks".

Calling it a "reckoning" would be a stretch considering the sheer scope of the rally that preceded what is now a two-day rout in US equities. So, let's just call it a "reality check" instead. Whatever you want to call it, note that Monday marked the worst underperformance for tech shares since October. It was the worst day in absolute terms for the S&P Info Tech index since August. The Nasdaq 100 - the poster child for the recent melt-up - has fallen nearly 3% over the past two sessions. And just in time for the heavyweights to either confirm the relative wisdom of the recent run-up, or call bullsh*t on a rally that pushed valuations to 23X. Remember, earnings growth for Info Tech has been negative for three straight quarters. And yet, tech shares have lapped the broader market over the past year, pushing the 14-week RSI above 80 for the only the fifth time in nearly 30 years (see the top pane below). It's now back down to 73, but still in overbought territory. The Nasdaq VIX rose the most Monday since the day the 2s10s curve inverted in mid-August. In bond land, a 5-year auction tailed, but it didn't matter. Yields were lower by 5-8bps across the curve, which bull fl
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3 comments on “Zombieland.

  1. mfn says:

    “The uncertainties which have characterized trading to begin 2020 have offered a bullish backdrop to the rates market, even as the economic fundamentals have been solid”, BMO said Monday. Wait, what? S&P profit growth is slowing. Monthly job growth is slower under Trump than it was under Obama. The annual deficit is $1 trillion and climbing. New business formation and R&D spending are at the lowest levels in decades. What are these people talking about?

  2. jyl says:

    Note that SPY and QQQ have only fallen about half of the way to their 50 day moving averages. And 100 MVA is a ways down from that. There is no support for quite a while.

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