June 260601, -260607
Author: Ariston
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Custom models by private message (currently custom daily models are available only for U.S. and Chinese equities, plus a basket of Crypto)
Note: Everything discussed in this document is for sharing and reference only. Recipients are not considered our clients merely by reading content on the platform, nor does it constitute an invitation to anyone to sell or buy securities or other investment products, much less a basis for trading.Markets carry risks; invest with caution.All information and views in this document do not constitute investment advice; past performance is not indicative of future results. Investors should carefully assess the matter according to their own risk tolerance, make independent decisions, and assume full responsibility themselves.Under no circumstances shall we be liable for any losses arising from the use of this content. The relevant data may be delayed or contain errors; we accept no legal liability for the completeness or accuracy of the information.
A squeeze trade in a fragile market structure
Chart: Shock-driven selloff in a fragile market structure (intraday chart, through 260607)
...markets across asset classes saw a shock-driven selloff amid fragile market structures...
...the selloff began with an interest-rate shock, which spilled over into crowded positions...
...this is not a recession trade...
After the nonfarm payrolls data, expectations of Fed tightening were revised upward and the dollar strengthened in tandem. Along with the chip selloff triggered by the continuation of AVGO overnight, and news that S&P Dow Jones would not adjust its inclusion rules ahead of three expected mega-IPO, technology-heavy sectors were first broken by positioning and technical factors despite no deterioration in fundamentals.
The clearest illustration is the intraday trading imbalance in NQM6 and ESM6, which were on completely different scales.NQ futures quickly turned to net selling from the U.S. cash-market open, reaching cumulative net sales of -118 hundred million dollars in notional value by the U.S. close, equivalent to -4.3z on the 1000-day rolling basis—an extreme level of tech de-grossing. ES futures were also weak, but net sales for the entire session were only -53 hundred million dollars, equivalent to -1z, and they found support for a time after the open.
Chart: Pressure was highly concentrated in the Nasdaq / AI / momentum basket
Market structures that previously amplified upward momentum can, on down days, work in reverse and accelerate deleveraging.Leverage ETF saw sell orders of about 600 hundred million dollars shortly before the close, with more than 90% directed at technology-related exposures such as NDX, SOX, and XLK. The futures imbalance likely reflected arbitrageurs positioning in advance for this portion of the rebalance flow, then completing the reverse unwind late in the session—effectively releasing intraday the rebalancing shock that would otherwise have been concentrated at the close.
Chart: EWY (minute chart, through 260607)
The gamma that had previously supported the index is no longer enough to withstand the continuing pressure from technology selling.
There are times when the market calls for action, and times when it does not. Many losses do not come from failing to understand the market, but from being unable to resist the urge to trade. No one has sufficient reason to buy or sell stocks every day, nor can anyone always have enough information to make every trade a wise one.
Image: Notes260529, “How Not to Be a Fool on Wall Street”
What is it that really makes people a lot of money?
It was always my sitting.
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In the market, bulls and bears, good people and bad, can all have their golden moments. The only ones who do not are those who cannot sit still.If you do not clearly understand what you are doing, it is very difficult to truly sit still.
Every trade made without knowing what you are doing is no different from gambling, whether it ends in a clear profit or a clear loss.People who suffer in the market repeatedly bear the costs of consolidations and wrong moves, only to leave before the corresponding returns arrive. In the end, they keep cycling through and bearing various risks without receiving the returns they expected.
Image: Harbor Dragon’s Q&A (https://www.meridianresearch.app/home?product=asia-strategies）
If you do not know whether you are gambling, you are gambling.
Image: Just Do Your Best
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Second, follow up on MLCC
Image: Notes260425, “They Are True Bulls; We Are Just ‘Speculators’”
Section Six: “Price Increases in MCLL and Other Passive Components”
Notes is where we cover the fundamental one-third of our three-system framework. Everyone should read it. First, read for the logic rather than the content: logic is transferable, while content is fixed. Understand and analyze the logic, and then you can do your own analysis. If you only take in the content, you still will not be able to think independently. Second, read with a critical eye. I can be wrong, too. And if you read my work without investigating and thinking further for yourself, you still will not know what you are doing. When you do not know what you are doing, you cannot hold your position and feel anxious. At bottom, that is still gambling—and gambling your own money on someone else. That is not good: you cannot sit well, much less have a sound basis for entering and exiting positions.
The date Notes was posted marked the substantive starting point of this round of gains in the MLCC basket.Here, we synchronize well-grounded entry and exit decisions at the tail end of the trend.Having a sound basis for entering and exiting means not only being right about the direction, but also acting at the right time.Not investment advice; make your own decisions and bear your own gains and losses.：
Image: Basket constituents (daily chart, through 260531); +100% since Notes was published, with the stop for taking profits moved to the blue dot.
Chart: Basket constituents (daily chart, as of 260531), +150% since Notes was published; take-profit stop moved to the blue dot
Chart: Basket constituents (daily chart, as of 260531), +110% since Notes was published; take-profit stop moved to the blue dot
AI The trend of servers themselves increasing their use of high-capacitance components remains unchanged, as does the trend of leading Japanese and Korean companies continuing to shift capacity toward higher-value-added products (which will further squeeze effective supply of general-purpose products); materials such as release films, ceramic powders and nickel powders will continue to benefit from premiumization and price increases, while Chinese manufacturers will also continue to find it easier to gain share amid supply-chain security priorities.
Chart: Basket constituents (daily chart, as of 260531), +60% since Notes was published; take-profit stop moved to the blue dot
Chart: Basket constituents (daily chart, as of 260531), +50% since Notes was published; take-profit stop moved to the blue dot
Sinocera has produced the basket’s first micro-level Failed Breakout, The first Failed Breakout following a sharp re-rating-driven rise is an early sign of disagreement among investors，MLCC the value chain’s average 27E PE has risen from 26 year 2 month’s 28x to 59x currently, while PEG has risen from 1.4x to 2.4x.
The strength of the benefits varies, and subsequent pricing will vary as well. Sanhuan and Jiemai offer price increases, share gains and operating leverage; Guoci is seeing volume growth in high-end powders; and Boqian is benefiting from high-end nickel powders and copper powders for solar.The market has already priced in expectations for nickel powders, copper powders and rising metal prices more fully, while expectations for the broader convergence theme—from MLCC materials through to the high-end semiconductor manufacturing equipment chain—remain insufficiently reflected.
At this point, a significant round of re-rating for the sector as a whole is largely complete. Future excess returns will depend more on company-specific delivery of price increases, share gains and ramp-up of new businesses; the sector cannot simply be viewed through an industry-beta lens, and internal divergence is now the base case.
Three. Technology (sitting well) (Korean index and US session)
To reiterate what Planet has discussed repeatedly, over the past while, going long technology has been the way to go long fundamentals.But the issue with these fundamentals is also quite clear，if we take this a step further, A large part of the surge in technology companies’ earnings comes from hyperscalers shifting future profits forward through capital expenditure to semiconductor and AI infrastructure companies. If enterprise AI use does not genuinely translate the productivity gains expected by the market into broad-based profit growth, this earnings impulse will be difficult to sustain over the long term.
1/ SOXX, the take-profit level has moved from 515 in last week’s weekly note to around 525; just stay positioned until the price itself signals that it is time to stop.
Chart: SOXX (daily chart, as of 260531)
2/ Korean index: the second position opened after the first round of exits discussed last week. After reclaiming the long-short reversal point, the price moved further higher; the stop has been moved from around 7200, the level used when entering in last week’s weekly note, to a take-profit level around 7850. Be sure to apply SO filtering.
Chart: KOSPI (daily chart, as of 260531)
3/ AMD, the take-profit level has moved from 430 in last week’s weekly note to around 486; just stay positioned until the price itself signals that it is time to stop.
Chart: AMD (daily chart, as of 260531)
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Chart: Scatterplot of theme rotation in the US equity market (as of 260531)
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A few other names:
Chart: CDNS (as of 260531), Stop above 358
Chart: SGC (as of 260531), Stop above 11.6
Chart: CRUS (as of 260531), Stop above 166.6
Chart: HPQ (as of 260531), Stop above 24.55
Chart: MDB (as of 260531), Stop above 294.44
Four. China market
As mentioned last week, China is in fact the only market in the world that failed to recover immediately after breaking below the bull-bear line. It has still failed to climb back above this line as of today.Those who continued to make erratic moves from the day it broke below the line may find that their account curves have not looked very good over these past two weeks.
Chart: Last week's chart; the Planet data summary after the close on 0513 showed the Shanghai and Shenzhen indices moving up in tandem and then turning quiet; proceed with caution.
Chart: Summary data (as of 260531)
Summary data are structural data, containing more key information than the noisy day-to-day price fluctuations.Among the one thousand fundamentally screened representative stocks in the mainland market, leverage, relative valuation, trend structure, and bull-bear status have all entered bearish territory.Until a turning point emerges in this group, marking a pause in the decline, it is difficult to speak of a genuine renewed upswing.
Chart: CSI 500 (daily chart, as of 260531)
Since breaking below 8695, it has not climbed back above it, and the rally has lost momentum.The new bull-bear line is currently at 8598.
Chart: Shanghai Composite (daily chart, as of 260531)
For the Shanghai Composite, the two red circles on Planet mark the substantive low and high of this rally; the entire process is documented.
The daily bull-bear dividing line is currently near 4113.
Chart: Shenzhen Component Index (daily chart, as of 260531)
Likewise, the two red circles.The bull-bear dividing line is at 15895, Pay attention to cross-validation between Shanghai and Shenzhen; a close back above the level in only one market is a false reclaim.
Chart: Scatter plot of theme rotation in the mainland market (as of 260531)
Don’t trust bullish bottoming candles or reversal narratives before the lag has played out. That’s catching a falling knife; a lag is a lag.
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Chart: Global discretionary funds are most underweight Chinese banks. But over the past 1 months and 3 months, funds have begun adding to Chinese banks and Korean industrials, while Indonesian banks have seen the largest cuts. As active money chases crowded growth narratives, it is also partly covering underweights and rotating into cyclicals, especially sectors such as Chinese banks that have been underweight for a long time.
Chart: China Construction Bank (daily chart, as of 260531), hovering near the upper edge of the purple box, with some capital attempting a breakout.
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Pop Mart is showing an unusual development, moving into the top ranks for net Southbound buying:
Chart: Pop Mart (daily chart, as of 260531), attempting to break above the red line; a breakout would signal an end to the downtrend.
Five. Foreign exchange
1 / The U.S. Dollar Index is still holding above 98.8. The AI boom and the energy supply shock are both improving U.S. terms of trade. Combined with stronger growth, a reversal in front-end rate differentials, and capital repatriation, this has driven a net rise in the dollar of 1-1.5% since early 3. But rather than indiscriminately going long DXY, a differentiated trade—long the dollar against G3 and short against some high-beta EM—is the more compelling approach.
Chart: U.S. Dollar Index (daily chart, as of 260531)
GBPUSD, a break below may trigger a downside move.
Chart: GBPUSD (daily chart, as of 260531)
2 / Relative policy and data trends in Australia and New Zealand have turned in favor of NZD. The RBNZ meeting was clearly hawkish, Australia’s CPI and employment data were weak, and expectations for a final rate hike by RBA have been pushed back. The only remaining support for AUD is the terms-of-trade boost from high oil prices. With rate differentials peaking, positioning crowded, and New Zealand more sensitive to de-escalation, the risk-reward for shorting AUD/NZD is becoming increasingly attractive.
Chart: AUDNZD (daily chart, as of 260531)
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Six. Oil prices and short positioning at multi-year highs
Chart: BRN (daily chart, as of 260531)
Take BRN as an example: after breaking below the round-number level, it has now also broken below the orange line.During the week oil prices peaked, we said on the Planet that the reopening of the Strait of Hormuz would definitely happen, but it would not return to normal overnight. Even if all security concerns were resolved immediately, it would still take several months. The first stage is for already-loaded tankers to exit the Strait, clear the ports, and move the oil out; that takes about a month. The second stage is for empty vessels to return, begin loading, and draw down inventories, taking several more weeks. Only the third stage is restarting upstream oil wells.
For restarts, high-quality assets such as those in Saudi Arabia need a month, while wells such as those in Iraq that require steadier flows need several months. This means that the decline in oil prices and normalization of energy flows will be more stair-step than smooth.A V-shaped return is not the objective reality. Any trade betting on a rapid drop in energy costs in Europe or Asia needs to allow for enough time.
What we really need to focus on here is where the first pivot point will form, The first pivot point will determine the slope of the subsequent oil-price move, so it is essential to watch it closely.
Chart: BRN short positions (daily chart, as of 260531)
Short positioning in Brent futures is building rapidly. Over the past week, managed money net sold 56 hundred million dollars’ worth of Brent, marking the 4 consecutive week of net outflows. Cumulative net selling since late April has reached 109 hundred million dollars, with positioning actively accelerating into the short trade.As of now, absolute short interest has reached a historic high. By notional value, Brent managed money shorts are only slightly below their multi-year high this week, putting them in a typically crowded range.
Once positioning reaches this level, for the market to move further down, it will take significantly more new bearish catalysts and new short positions. On the one hand, longs would need to start closing out on a large scale; on the other, term structure shorts would need to build up significantly again. We have seen neither of these so far.
Chart: CTA has not yet turned fully bearish
Sudden events could trigger a short squeeze, so exercise caution at your own risk.
Seven. Alternative assets
Chart: Xiaohuang (daily chart, as of 260531)
Xiaohuang has continued to fall since breaking below the 81650 long-short line; here, the new long-short line has moved above 74460.
Eight. Gold, silver, copper and aluminum
1/ Gold has moved as expected. Those four words are irritating to hear, but they do need to be said. The point is not to boast about how good I am, but to help everyone learn to see this for themselves. The 4595 long-short line we identified provided extremely strong and precise resistance over the past week, The long-short line matters because significant active capital will be concentrated around it, battling it out, so it is not easy to break through. But once it does, the pressure on gold will be released.If you have carefully read the article on moving averages in the introductory manual for the community, you should now be seeing that bullish capital is waiting for the holding costs hidden behind the orange line to come down. It will be easier to act once they do; they are too high to reach right now.
Chart: CMX Gold (daily chart, as of 260531)
The candle body is precisely positioned above the blue line and below the red line we marked.Wait for a breakout. Go short on a downside breakout and long on an upside breakout. Just watch out for a failed breakout here; if one occurs, trade in the opposite direction.
2/ Silver has likewise moved as expected, the gold line provided precise support, and the red line precise resistance。We are not going to pretend to be wise after the fact; we have kept a record of everything throughout, so review it for yourself. Drawing lines is not about playing the oracle; learning to draw them well takes practice. Behind the lines are capital costs, Mr. Market’s sentiment, and the real money of both bulls and bears. They may look easy to draw, but drawing them well is difficult.
As with gold, wait for a breakout.
Chart: CMX Silver (daily chart, as of 260531)
3/ Aluminum: the stop has moved up slightly, to above 3560. It has tried several times to move lower, but remains in bullish territory.
Although the overall fundamentals are quite contradictory, follow whichever side’s territory the market is in.
Chart: CMX Aluminum (daily chart, as of 260531)
Some basket proxies:
Chart: AA (daily chart, as of 260531); move the stop on the long position below Thursday’s low
Chart: CENX (daily chart, as of 260531); the stop on the long position is at breakeven
Chart: Huafon (daily chart, as of 260531); the stop on the long position is below the entry point
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IX. Miscellaneous: The problem with U.S. consumption
The weekly note two weeks ago discussed U.S. consumption, particularly the problems facing the lower half of the K-shaped economy, so I won’t repeat that material. What I’d add is a point about timing: why the fundamentals of consumers in the lower half of the K may deteriorate further after the second quarter.
Chart: Real Disposable Personal Income
April’s real DPI year-on-year -1.1% supports the view that the short-term resilience in consumer spending in the first quarter was more likely an illusion caused by one-off tax refunds.The unusually large U.S. spring tax refunds provided a burst of support of about 1400 hundred million dollars. As cash flows normalize, 26H2 consumption growth may slow markedly Meanwhile, consumer confidence in May had already fallen to a record low. The U.S. economy is more likely to see divergent growth, with strong investment and weak consumption, than broad-based strength, It is unrealistic to expect the indexes to rotate rapidly and broadly once technology stocks lose momentum; it will be hard to find the next pillar of support.
Chart: UMich Index of Consumer Sentiment
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Do your best.
(End of article)
A quick plug: the companion U.S. equities, A/H shares, and commodities Planet channels are still being continuously refined.
A quick plug: the companion U.S. equities, A/H shares, and commodities Planet channels are still being continuously refined.
U.S. equities:https://www.meridianresearch.app/home?product=us-strategies
U.S. equities: https://www.meridianresearch.app/home?product=us-strategies
A/H shares:https://www.meridianresearch.app/home?product=asia-strategies
A/H shares: https://www.meridianresearch.app/home?product=asia-strategies
Commodities:https://www.meridianresearch.app/home?product=commodity-strategies
Commodities: https://www.meridianresearch.app/home?product=commodity-strategies
Note: All content in this article is for reference only and does not constitute investment advice, nor should it be used as a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for their decisions.
Note: All content in this Sphere is provided solely for sharing and reference. Recipients are not deemed to be our clients by virtue of reading content in the Sphere. Nor does it constitute an invitation to anyone to buy or sell securities or other investment products, or a basis for trading. Markets involve risk; invest with caution. All information and views in this Sphere do not constitute investment advice. Past performance is not indicative of future results. Investors should carefully assess the information in light of their own risk tolerance, make independent decisions, and assume full responsibility. Under no circumstances shall we be liable for any losses arising from the use of content in this Sphere. Relevant data may be delayed or inaccurate, and we accept no legal responsibility for the completeness or accuracy of the information.
Note: All content in this document is for reference only. It does not constitute any investment advice, nor does it serve as a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on such information as the basis for decision-making.