README

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General Market commentary

S&P 500 is down 0.38% today. However the growth stocks are still on fire. The problem is those mega-cap stocks are dragging the market down. In particular, Facebook has been sold off for a month. Experienced market participants can clearly see the money is rotating out of those mega-cap names. There are a few reasons for that, but we’ll list the two most important reasons:

Political risk. Democratic party controlled congress can be a huge political risk for those tech giants. Aaaaand market doesn’t like uncertainty. Instead of making risky bet, smart money is flowing out of these names.
Secular run might be finished. Those mega-cap stocks had a superb run in the last few years. And they have became investors’ favorites. Virtually everybody owns those stocks. What happens now? You have a huge amount of supply. To move those stocks higher, you need an even bigger amount of demand! We are talking about trillions of dollars here. But where will those demand come from? Unless those tech giants can keep posting accelerating earnings, they are already richly valued.

Quantative market model signal

Midterm trend: bullish
Midterm risk: neutral

Featured charts

FB

Facebook closed below its 200 day moving average today. This is a MAJOR warning sign. FYI, Market leaders usually trade way above their 200 day moving averages. It is worthy for those mega-cap stock owners to be highly alertive in the current market and even the next few years to come. Don’t get me wrong - they can still go higher. However, it is highly likely they will be the new laggards in the future. Warning has been sent on Jan 14th, 2021.