Sell-off towards the last few minutes being attributed to David Einhorn depicting a second tech bubble.
By 4 pm the averages had melted off the session highs to a modest closing. There is so much noise in the financial world that is difficult to discern what is and what isn’t happening. As usual, there is more to the story as the bulls put on their party hats.
The markets generally stopped at resistance today and backed off, maybe to gather up steam and go for the historical highs again. With the Ukraine situation teetering back and forth, I would advise caution in taking any position. However, look to tomorrow for market weakness and perhaps a down day which several analysts have predicted.
Tuesday Pop Turns To Einhorn Drop As Stocks Stumble Into Close
US Equity markets were on a mission today… all-time highs for the S&P and Dow were in sight, green for April for the S&P, and unchanged year-to-date for the Nasdaq and Russell was just over the horizon, but…
A total divergence from JPY carry, bond yields, credit, and even VIXmeant that a ‘warning’ from David Einhorn about Tech Bubble 2.0 was just enough to take the juice out of what was already a low volume levitation.
It’s a Tuesday so we closed green – the 6th up day in a row – longest run in 7 months.
Biotechs ripped higher on M&A “get rich quick'”fever – biggest 2-day rise in 30 months.
Treasuries were mixed with 30Y bond yields ripping lower and 5s30s dropping 4bps to 1.75% – new lows since 2007.
Copper made modest gains on the day but gold, silver, and worst of all WTI crude all dropped on the day (WTI -2% to $102).
Here is the David Einhorn prediction.
David Einhorn: “We Are Witnessing Our Second Tech Bubble In 15 Years” – Full Letter
“We have repeatedly noted that it is dangerous to short stocks that have disconnected from traditional valuation methods.
After all, twice a silly price is not twice as silly; it’s still just silly.
This understanding limited our enthusiasm for shorting the handful of momentum stocks that dominated the headlines last year.
Now there is a clear consensus that we are witnessing our second tech bubble in 15 years.
What is uncertain is how much further the bubble can expand, and what might pop it. In our view the current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm.”
David Einhorn: “We Are Witnessing Our Second Tech Bubble In 15 Years” – Full Letter
