| Thursday, July 09, 2020 1. Investors retain favorite stocks but sell the others 2. The plight of the Japanese investor 3. Macro investor fears are beginning to spread Market Moves US stock indexes diverged today as the S&P 500 (SPX) fell slightly while the Nasdaq 100 (NDX) rose nearly one percent. Investors played favorites and bought tech stocks while selling other large cap sectors. Retail investors' fascination with tech stocks seems to have reached a point where it needs to be rationalized by the institutional investor community. To put this in urban-dictionary like terms, is this tech stock enthusiasm the result of a fandom or geekdom? The chart below shows why the question matters.
Scour your favorite source for definitions of slang, and you'll find that things labeled as a fandom are likely considered silly but harmless. By contrast, the less-often applied term for technology-obsessed behavior, geekdom, is often applied to things that are taken just a little too far.
On the left half of the chart the Nasdaq 100, as tracked by Invesco's Nasdaq 100 ETF (QQQ), has shown an unbroken upward trend recently (chart depicts 30-minute increments). Since the beginning of July, the index is up nearly six percent. This contrasts strongly with the S&P 500 which is up less than two percent for the same time period. Are tech stocks that much more valuable than other sectors? Quite possibly yes, because of pandemic conditions. However, if investors are overthinking this single characteristic, it could lead to trouble as stocks get ready for earnings season to start next week.
The case of the three leading social media companies makes for a good comparison. Alphabet (GOOG), Facebook (FB), and Texas Instruments (TWTR). The performance of these three stocks varies. However, since they are all relatively weak compared to other leading technology stocks, then none of them will fare well if the technology sector begins to falter.  The Plight of the Japanese Investor
The chart below shows why Japanese investors might be interested to convert some of their money to gold right now. The spot price of Yen futures compared to Gold futures (6J/GC), shows a steady trend lower. This depicts how the Yen has continued to fall in relation to the price of Gold. The currency comparisons in the other three panes of the chart show the most recent trends so far this year. Chart watchers who know where to look recognize that the rapid fall of the Yen in relation to the Australian dollar has the conspicuous similarity in appearance to something else: The CBOE Volatility Index (VIX). 
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Macro Investor Fears are Beginning to Spread When the Yen is priced in Australian Dollars and compared to the VIX, the chart below is the result. This chart also tracks changes in the historical volatility (as tracked by the light-blue, Keltner-channel indicator). The notable portion on the chart is the most recent month. That's where the volatility channel expands as if in anticipation of a wave of necessary selling. The price pattern on the Yen rose today as if in confirmation.  The Bottom Line Stocks closed mixed today as some investors seemed to show a clear preference for technology stocks over others. Institutional investors, whose behavior can be seen through the moves of the VIX and the currency markets, seem to be indicating that they are concerned about the coming earnings season, and how the retail investors will react.
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Thursday, July 9, 2020
Fandom or Geekdom
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