We are today the 25th of May 2021 and we are recommending investors to short the US Technology mega-caps.
It is an important call as we see two things happening in the coming days..
One is the fact that we are globally moving into the timeframe of the sharp correction that we predicted for June 2021. The rally of the last two days is lacking momentum and we should see the SP500 and the Nasdaq Indexes topping out this week with a lower high.
This should lead to a 10 to 15 % correction in these indexes with our target on the SP500 to reach 3’800 by the end of June.
NASDAQ 100 Index
More to the point on the FAMANGs, we have been arguing for many months and weeks now that the US Mega Caps were soon going to enter a bear market and that their ultimate highs have already been reached.
The multiple bubble-popping of the past few weeks indicate that there is a change of global sentiment and the VIX index points to renewed volatility in June.
The clouds are amassing on the horizon of the US Mega Tech stocks with Germany launching today a new anti-trust action against Google, following on the steps of the two launched recently against Facebook and Amazon and based on the new German anti-trust laws.
A strong negative catalyst could be the ruling of the judge in the EPIC vs Apple case, a decision that will certainly be appealled, but one that will most probably qualify Apple as a monopoly if legal history is any guide. Such a qualification based on preceding rulings and in particular the 1992 Anti-trust case against Microsoft would be upheld in Appela courts, painting the company, and its equivalent such as Amazon, Google or Facebook in a new frame where the current 50 anti-trust actions being prosecuted at the momet would stand on much more solid grounds.
The question of a break-up of these US mega tech giants would come to the forefront, creating much uncertainty as the companies would enter long and hazardous legal battles.
The breakup of monopolies is where we are heading and it has never been a smooth sailing process.
The rebound of the last two days lacked momentum while most of these stocks are now displaying negative configurations.
Our fear is that the looming global correction could start a LASTING bear market in these stocks if their support levels are broken.
As the following chart shows, the upward momentum of the NYSE FAANGS + index has been broken and a break down below the current support would take the whole index sharply lower.
Contrary to the rest of the market, we see the June correction as the beginning of a lasting bear market while we see the global indexes just correcting for now.
Protecting your Portfolio
We are of the view that there is way too much risk for investors to ignore those warning signals.
Monetary Policy is becoming inefficient, the FED may feel pressure to change its wording with regards to inflation, the Crypto world may be imploding and Apple’s legal case could be a game changer.
One of the best way to hedge one’s portfolio is the
EXANE US TECH SHORT Index Certificate that we launched in March 2021.
BUY Exane Leverage Tracker Short on US Technology Basket. ISIN CH0590403132
@ USD 37.5
This convenient instrument replicates the Mechelany Advisors US TECH SHORT PORTFOLIO in one single Swiss security with a 2x leverage. It can be acquired conveniently using its ISIN code and its leverage allows to hedge a portfolio more efficiently with less capital involved.
It is also a great instrument for investors willing to generate Alpha without having to go through the complexity of shorting stocks or paying large time premiums though the option market.
The Portfolio is down -2.29 % since launch, and the EXANE Certificate offers a 2x leverage on this SHORT portfolio. It trades at USD 37.5 today.
Download the Factsheet by clicking on the image below.
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