B Wavelength
Welcome to the 'B' wave. Play it carefully if you dare.
Last week seemed to turn the tide. Friday's tentative bounce followed through yesterday. The plurality of advancers over gainers was typical of a valid short-term turn with substance. So, the trader in me has enough evidence to go long here for a trade after a brief pause. Call it the 'B' wave gambit, if you will.
The most gratifying aspect of this sell-off has been the rotation away from the AI-heavy Megatech plays, which continues today. It's been a long time coming. The poster boy of this over-owned group, Tesla, now seems destined to spend this year in the penalty box. CEO Elon Musk has endured a swift kick in the Tesla-cles by consumers and investors, and no amount of ketamine can keep him from wallowing in self-pity. BYD's announcement of a recharging breakthrough is just gasoline on the dumpster fire sale of last week. Cybertrucks (aka Swastikars) are now piñatas on which woke mobs can vent their frustrations. Used Teslas are valued like '80s beanie babies. And before you bottom-fish $TSLA for another FSD-fuelled rally, check this out: https://www.youtube.com/watch?v=IQJL3htsDyQ&t=25s&pp=ygUSd2lsaWUgY295b3RlIHRlc2xh
Would you trust this man to program your car?
I had expected the market to become more oversold, but the rotation away from the Mag 7 helped steady the ship a bit earlier than expected. The beneficiaries, Eurozone equities, Defensives, and Deep Cyclicals, helped balance the Index and kept it from becoming a complete bear market. It is just a run-of-the-mill correction. Thankfully, the crowded trades are now unwinding, prompted by every haphazard tariff tape bomb from the Mussolini of Mar-a-Lago.
At first, Trump's old playbook seemed behind the madness, as tariffs were posited as bargaining tools. Now, this 'Art of the Deal' theory is being revised. It's more like the 'Start of the Steal' - with his targets including the Panama Canal, Greenland and Canada. This level of craven imperialism is copy-paste from Vladimir Putin's Modus Operandi. But what did you expect from Trump - now clearly a Russian asset? As I write, he and his controller Vlad are busy field-dressing Ukraine like a trophy 7-point buck. Taking equity risk in an environment with such geopolitical uncertainty is not for the faint of heart.
Before you accuse me of excessive T.D.S., please explain the sudden reversal of decades of collaboration between the Western Allies and Fortress America. If it wasn't completely broken, why try such a radical fix? The plan has been to generate an axis of influence that sheds old ties to previous constructs like the OECD and the United Nations. Egged on by the alt-right, Trump's America First makeover is just getting started. I believe this is at work in every move he makes or project he proposes. So, the risk level to consumer and investor confidence will only ratchet higher if Trump's power-hungry acolytes continue to hold sway.
Hence, my reticence to call for anything other than a 'B' wave rally. But it looks like a barbell of banks and select cyclicals could run into a seasonal high period that lies just ahead. Eurozone stocks are running, hoping for a fiscal goose step from German increased defence spending. Copper (always a Tuesat11 fav) is off to the races, aided by China's renewed fiscal impulse. Oil stabilized after the OPEC decision as it prepared for the seasonal Easter-Memorial Day rally phase. Remember: Teck >Tech.
Given the rapid risk-off purge reflected in the B of A survey and the bombed-out AAII Sentiment gauge, I see lots to buy here with little risk of a recession. This looks like a growth scare. Bull markets rarely die of old age. They typically must be killed by a monetary contraction that isn't present today. I think this time, the bull might die by requesting M.A.I.D. - MAGA Assist in Dying.
Risk Model: 3/5 - Risk On
Copper/Gold and the price variables look to be helping here. Only the bombed-out AAII and VXV are lagging the buy signal, but both will likely follow the higher price pattern shortly.
I'm holding back some dry powder just a bit here for the VXV to further subside and awaiting a 'buy the news' tariff announcement. Hopefully, a relatively sane actor, Jamieson Greer, Trump's U.S. Trade Representative, has taken some control of this file.
As an ex-Air Force JAG, we can only hope he's telling him:
"You can't handle the truth!"
