Sectors Relative to QQQ

NDX-Copper Top

Nasdaq Rebalance

US funds hit limits on holdings of high-flying tech stocks

Major asset managers and mutual fund specialists such as Fidelity, BlackRock, JPMorgan Asset Management, American Century and Morgan Stanley Investment Management have run into strict regulatory limits that determine whether a fund can be categorised as “diversified”. The trend is a further sign of how a lopsided rally powered by just a handful of big companies is creating unexpected issues for investors and index providers, and follows news that even the Nasdaq 100 — the index most closely associated with high-flying tech groups — will be rebalanced to reduce the dominance of the largest groups such as Apple, Microsoft and Nvidia. The S&P 500 has added 18 per cent so far this year, but seven large tech stocks have accounted for the majority of the gains. Mutual funds that register with the Securities and Exchange Commission as “diversified” cannot put more than 25 per cent of their assets into large holdings — with a large holding defined as a stock that represented more than 5 per cent of the fund’s portfolio at the time of investment. Funds are not punished if the value of their existing large holdings naturally rises past the 25 per cent limit, but once it is hit they cannot buy any more of the affected stocks. At the end of May, Fidelity’s $108bn Contrafund, for example, could not buy any more shares in Meta, Berkshire Hathaway, Microsoft and Amazon, because they made up a combined 32 per cent of its portfolio.

I covered this topic several times last year, most recently here: Why You Shouldn't Own Apple Stock and even more recently on the Substack: Me in April: Microsoft Done, QQQ Fails Diversification Rule

The Nasdaq 100 will undergo a rebalance because of this issue. My view is this is the sign of a massive market top. Last time this became an issue, the market solved it in March 2000. That this is going for almost 5 years now, going back to the 2018 major sector shuffle, indicates this could be a far larger top in time and price. The alternative explanation is the United States is becoming a techno-fascist country with emerging market qualities. For example, Taiwan Semiconductor is around 40 percent or more of the Taiwan market capitalization.

Go Time for Bears if 12000 on NQ Falls

NQ still battiling in that area. I'm encouraged by the collapse in the peso though. It gave way intraday and is below where I first said to short it.

Palladium Flirting with Final Support

It is at the late 2021 low and broke long-term support above this month. I am not shorting palladium because Russia is a major producer and geopolitical outcomes could be wild, but rather as a leading indicator for the Nasdaq.

Palladium Breaks Support

Here are prior posts where I used palladium as a signal to short Nasdaq.

Who Wants to Short Commodities?

Nasdaq and Palladium

The Top is Coming

There can be a large gap in time between the moves. I view palladium as the leader here because it broke a major topping pattern. If it recovers, perhaps Nasdaq is leading short-term. A palladium and Nasdaq top are consistent with what I expect for a bear market and transition to new bull market with new leaders.

Dominoes Lined Up and Falling

ES traded down to a support level this morning. THe Dow Jones Industrial Average lost the 1929-2000 trendline. Palladium is threatening a top completion and breakdown.

Binance is in trouble and it is the market:

Platinum:

Palladium

Could give a new signal to short tech and growth if it loses support.

QQQ/SPY Ratio

Apple Ratios

A trip to the lower support on AAPL/QQQ corrolates to a $130 price at the current level of QQQ> A conservative target is a touch of that support. Adjust for move in QQQ.

Value Crushing Growth

The DJIA is barely down at the moment while the Nasdaq is almost down 1 percent. Value has been crushing growth all year and outperformance has accelerated during the rally from 3500.

QQQ Target is Live

$220. A new rally high on the S&P 500 Index will send me to the exit, but stock-specific pops such as Apple or Amazon spiking on earning might have me buying more puts. Risk of spike with Meta earnings today, Apple and Amazon tomorrow. All after the bell.

Nuclear Silos Opening

Bombs away. It's time to short away. I will get out if new highs are taken out. I'm buying December puts.

Engulf Crisis

I will not be shocked if the S&P 500 Index ends up with a bearish engulfing candle into the close. Unlikely, but not impossible because last major support is around 3580 on the ES. As for stuff that is already or almost engulfed, here are a few. Note that if there is a trendline visible (uptrends, not horizontals), it is at last a few years old. Some are lifetime. I included QQQ to show how far away it is on the indexes. It would take a major drop in the last hour to get there. If the market drops another 50 points or so, them majors will still be well off Thursday's lows, but there will tons of these candles out there on individual securities.

Another one almost almost guaranteed if the market dips a little bit: Tesla.

Since 3700 Didn't Crack, Shorting More

ES held the line. Here is AAPL as an example. I think what happened today is a one-dy version of these prior moves.

QQQ Target Hit

I thouhgt the market would get lower and maybe it still will soon, but QQQ bounced right off a target area.

QQQ-SPY Busted

I'm almost fully hedged at the moment with a bullish daytrade, but planning to close it out soon enough. (And did before posting). Signals such as this ratio, plus breakdowns in EEM, META and so on, all still point in a bearish direction.