Are You Ready to Press The Screws On This Market Rally?
How we could be entering a wild time in the markets, the one thing that could take it out, and speculating on whether Zelensky wears a suit.
Living In A Smallcap World
This is a chart of the equal-weighted Nasdaq (QQQE) to the Russell ($IWM). With JPow’s speech at Jackson Hole, the rate cuts are on and we’ve seen a massive outperformance in smalls.
The other time we had a massive decline in this relationship was back in late 2020 and early 2021. Do you remember how wild that was? I’m not sure we’ll have that kind of “silly season” again, but further risk on would surprise most and pay out for early risk takers.
(I want to be an early risk taker. Calls are cheap, get them while you can.)
The only thing that could take out smallcaps would be if there was a hard liquidity pull in the Mag7. Doesn’t matter how good of a stock picker you are… if funds are bailing on NVDA after earnings, you’re taking a loss.
But I don’t think that will happen.
The Nasdaq VIX (VXN) had another pop this week back up into the 20s. Current NDX vol is in the 18s.
This is the test. If the range in the Nasdaq can compress— and it doesn’t even require a push to new highs— that will give the riskier names room to move.
How To Track A Russo-Ukranian Ceasefire
Last week, Putin had a quick trip to Alaska as the Trump admin tries to smooth things over in Eastern Europe.
I’m not going to pretend to be an expert on the conflict. I hate war, there’s no good guys, and it would be better for the entire planet if this got sorted out.
It would have second order effects. A ceasefire means some Indian tariffs come off the board, and there would (most likely) be a downside pressure on oil. That reduces friction in trade and is deflationary, which gives central banks more breathing room.
There are markets you can use to track the odds. Polymarket shows the 2025 contract behaving like a decaying call option:
Caveat emptor - those betting markets can easily be gamed, and can be used for price action to drive narrative.
There is one Ukranian stock to watch. I only found it running my scans this weekend.
Kyivstar (KYIV) - it’s a telecom company that operates in Ukraine, and was a recent SPAC listing.
Price action went parabolic after the Alaska meeting:
Over the coming weeks, if there’s a vacuum of newsflow but volume is running hot in this stock, then that’s a signal something’s up. I’m not planning on trading it, but I’ve got price alerts at $17 and $20 to give me some kind of a metasignal for the broader markets
Breaking Down The Intel Deal
INTC is at the upper end of a year long range, and news recently hit that the Fed’s are taking an equity stake in the company.
A lot of pearl clutching is going on from detractors screaming about how this isn’t a “free market,” or that the USG should have zero business trying to stealth-build a sovereign wealth fund. These same people were just fine with all the other market interventions that have occurred since the GFC, and it’s just sour grapes.
If you dig into the deal, it turns out that the CHIPS act had about $9B in unpaid grants, and they just converted that money into an equity investment. It’s not new money, but a new structure.
I think this beats the pants off of just giving block grants. If US Taxpayers can manage to catch some of the upside, then let it rip. The US now has 433 million shares, and if INTC manages (somehow) to reinstate their dividend to what it was a year ago, then you’re looking at $520MM per year. It’s the Art of the Deal, I can’t hate.
Setups for Convex Spaces Clients
We’ve had a solid lineup of plays through August, and I want to turn the screws on the market. I think sidelines investors are still staring in disbelief that they’re stuck in a 4% money market when the Russell moved that in a single day.
We’ve got 6 new setups to look at this week. Some of them are momentum names I’ve been watching for a year; others are stop loss reclaim trades that have
Oh, and we’ve got to sneak one crypto play in here as well.