Hi YXI friends,

While the market cannot go up indefinitely, investors can rotate their money from leaders to laggards to stay in the game. That is what exactly they are doing right now.

This is seen in the sudden outperformance in small cap stocks, a straight line rocket ship in Ether (ETHUSD - chart included for premium subscribers today), and the breakouts in AAPL and TSLA this month.

Housekeeping: I am on holiday in the week of 25th of August. I will try to get the daily signals out as normal, but will not be sending the fdaily written pieces.  

Table of Contents

• 1. YXI Dashboard

• 2. SPY, QQQ, (SPDW)

• 3. FOMC Projections

• 4. Summary Of Today’s 4-3-2-1 Ratings

• 5. USO

• 6. 30-Year Treasury Yield & TLT

• 7. Bitcoin (BTC), Ether (ETH)

• 8. Gold (GLD, GDX)

• 9. Magnificent 7 Stocks

  • Apple

  • Amazon

  • Alphabet

  • Meta

  • Microsoft

  • Nvidia

  • Tesla

• 10. Other

  • SOXX

  • PLTR

• 11. Trade Updates & Monitoring

• 12. Notable ETF Flows From Previous Day

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

Please check out our glossary for explaining the acronyms, financial terminology, and economic data.

1. YXI Dashboard

There was a lot of back and forth yesterday in equities, with the market selling off the initial SPY high open into the early afternoon. Fortunately, the index ETF did recover into the green day in the day and has stayed flat post-close.

Interestingly, small caps got bid throughout the day, with IWM up 1.9%.

SPY 5min chart

IWM 5min chart

This is interesting because this month, there seems to be some rotation out of the large cap winners into the laggard areas.

For August MTD, small-cap value and small-cap growth have both outperformed large and mid caps. One could argue we are entering the speculative phase of the bull market, in which investors expand their risk appetite for promising but relatively unproven names.

Click here for the past YXI article explaining many of the components of the dashboard.

2. SPY, QQQ, (SPDW)

SPDW is updated every Monday.

SPY (https://www.tradingview.com/x/FvqZVRDT/)

SPY’s green close did put it at a new ATH. An ATH, however gained, is always a bullish sign about the overall market environment. It is just investors intuitively don’t like the notion of being the “last buyer”, which is always the risk at new highs.

Rotating money into the laggards is one coping strategy to stay in the game without “buying high”. However, there is equally the risk of the winners riding into the sunset while the laggards continue lagging.

SPY Valuation

Looking at the valuation, SPY’s PE (NTM) is at its most expensive in 4 years, but still below the bubbly 2020-2021 peak.

If we get a 10% selloff here, taking SPY to $580 or around the 200-day MA, we are only back to the past 5-year average in terms of valuation. I think there will be a huge pile of demand before we even touch that region.

QQQ (https://www.tradingview.com/x/ncNIYlRS/)

QQQ is in an elevated position here in wave 3, at the 200% extension of wave 1. It can of course further extend, but the rotation we are seeing now suggests the near-term upside may be limited for investors chasing.

3. FOMC Projections

We use the Fed Funds futures market to understand the market expectations of future FOMC interest rate decisions.

The market expects the Fed to cut 5 times (assuming 25bp each time) in the next 12 months.

(From today, I will present the projection in the format of a chart instead of table.)

4. Summary Of Today’s 4-3-2-1 Ratings

SPY, QQQ, BTC, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, PLTR, TLT

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