Early Saturday morning – even before Iran fired missiles at Israel – I wrote that the bear market was on the cusp of being resumed. In fact, I literally guaranteed it at the end of the accompanying YouTube video I made at 5am PST. (Scroll to the end of the YouTube at the bottom of the blog to watch me guarantee it).
Three days into this week obviously I’m feeling even more confident in that call. Bulls will argue that the S&P is only 5% off its all time highs and this is just a standard correction so far. But the ferocity of the selling and the carnage beneath the surface combined with the fundamental reasons (higher for longer and the Middle East War) convince me otherwise.
The NASDAQ has already had a failed breakout from its previous bull market highs around 16,000 at the end of 2021. The Equal Weight S&P (RSP) is barely above that level ($158). The S&P is still a ways from falling below that level (4800) – but that’s only because the Magnificent 7 are holding it up. And they’re going to roll over next.
That’s where my short book is concentrated: Nvidia (NVDA), Facebook (META), Apple (AAPL) and QQQ. Once the S&P crashes through 4800, it will become clear that the last 18 months was one of the biggest head fakes in market history. I wish I knew how to trade in and out to capture all the upside and the downside but frankly I think that’s impossible.
While I am short Big Tech, the real money will be made in long term treasuries (TLT) in my opinion. That’s because as the economy rolls over into recession the demand to borrow money for investment will plummet causing interest rates to fall. In addition, the Fed will start cutting rates to support the economy. Higher for longer is just not sustainable. My long TLT position dwarfs my short Big Tech positions.
As I wrote in “The Crowd And The Contrarian” (April 6), the crowd makes money during the trend while contrarians like myself make money at inflection points when the trend reverses, the crowd is caught wrong footed and prices rapidly adjust to the new reality. The great Jesse Livermore said the big money is made by sitting tight when you’re positioned right thereby allowing the market to give you the full measure of the move that is coming. I still have a $115 price target for TLT which is an almost 30% move from here – though I now expect that to be reached in mid-2025 rather than mid-2024.