[2.7 US Stocks: Some Thoughts] This series of speculations considers two issues. The first is the market performance this week, and the second is the market performance since October last year. Let's start with the first point: This week's "deleveraging" was very clearly caused by non-fundamental factors. Why this week? Because gold and silver crashed last Friday. The crash had consequences, which extended to Bitcoin and US stocks this week. This propagation path is clearly from different assets with high momentum (silver) to low momentum (US stocks) (1)

Friday's big rebound was also without any fundamental factors, but purely a combination of "retail investors buy the dips" and "short covering". The sectors and stocks with the biggest gains on Friday were all momentum sectors and stocks that had previously fallen sharply. So if we only look at Friday's market, we cannot conclude that US stocks have rebounded. At best, we can assess it as neutral. But more accurately, it is still a "strong rebound in a downward process" - we cannot conclude that "deleveraging" has ended (2)

Zooming out further, since the end of October last year, US stocks have actually been consolidating for more than three months. Why? Now it's very clear—institutions are definitely "deleveraging" in the big tech stocks with the "AI narrative." The reason is the concerns about capital expenditure since late October, marked by the day on November 20th when earnings reports showed a decline instead of an increase. (3)

Since late October last year, the real market trend has been: institutions have been selling off large-cap tech stocks, while retail investors have been buying them (and in some sectors, such as memory chips, there have even been speculative "top-chasing" price movements). Meanwhile, during the deleveraging process, institutions bought into other sectors to maintain their delta neutrality. For example, the XLB/QQ ratio surged starting in November, marking its steepest upward trend in nearly five years.

There are three possible scenarios: First, a fundamental trend emerges that makes "institutions" believe in large tech stocks again and start following "retail investors" again, in which case the US stock market bull run continues and reaches new highs; second, institutions remain on the sidelines and look for scattered hot spots, while retail investors' "support" can still hold on, in which case the US stock market will consolidate; third, institutions remain on the sidelines, but retail investors suddenly "can't hold on" and the US stock market will decline (7).

Currently, the market is moving towards the second scenario, and is very likely to move towards the third scenario, but is unlikely to move towards the first scenario—especially since almost all of the recent financial reports of major tech stocks have been released except for those from $nvda, and institutions still have no interest in entering major tech stocks! (8)

These thoughts are intended to guide my own trading. Therefore, I believe: First, I am not currently investing heavily in large-cap tech stocks, as the current market is being supported by retail investors, and there is no significant upward trend; in fact, they may be subject to selling pressure. Second, the possibility of a decline or even a sudden crash in US stocks is not low, because the market is mainly maintained by retail investors' support for large-cap tech stocks. Third, the decline this week due to deleveraging is a serious warning. Although there was a rebound on Friday (9)

Fourth, the valuations of so-called "defensive sectors" are not low now. Interestingly, for example, the valuation of $wmt is exactly the same as the valuation level before the US stock market crash in Q4 of 1999. (Defensive stocks also surged before the crash in March 2000). (10)

Fifth, the so-called surge in gold and silver prices, the "reflation trade," and the "sell-off of software stocks" are all short- to medium-term narratives, mere "episodes." The real main theme for the US stock market right now, in my opinion, is only one: whether institutions will re-buy large-cap tech stocks... I haven't seen that narrative emerge yet. (end)