VRA Investment Letter: It's Rotation, Not Panic. Semis Soar. Permabear Warning. Trump, The Crypto President.
/Good Thursday morning. In Wednesday's VRA Letter, as Nvidia was falling 7% and taking the markets with it, I wrote the following:
“This looks nothing like panic selling or a liquidity event of the type that would take the broad markets sharply lower. Instead, this looks like a continuation of the rotation that’s been under way for some time. Rotations are bullish. And, it will result in the lows taking place in the semis/tech….based on our work…likely in short order.
What we see looks very much like the shakeout that occurred from end of February to early May. That’s what this is…a shakeout. This is setting up as the next solid buying opportunity in NVDA, which means the same for our position in SOXL, where we remain buyers. Last: $38”.
Since Wednesday’s Letter, NVDA has jumped from $103 to $121.
Yesterdays monster move higher in semis/tech (Nasdaq +2.6%) came on the heels of a Federal Reserve that did exactly what was expected, with a dovish statement and equally dovish Powell presser. As Tyler (our resident Fed watcher) covered on his podcast yesterday, the writing is on the wall; the Fed will cut at their September meeting. Our only question is whether it will be a .25% or .50% cut.
Powell’s statement “now that the labor market is normalizing and inflation is cooling, the time is nearing for a less restrictive stance” was just what the bulls wanted to hear.
The Fed sees the collapse in 10 year yields that we’ve been hyper-focused on and know they have remained too restrictive for too long. This morning the 10 yr yield is 4.03%, with a move below 4% directly ahead.
The chart that we have called “the most important chart of this bull market” looks to have come through for us again, as the semis to S&P 500 hit the lower channel line “exactly”, resuming its bull market trend. Massive buy signal, which I break down next…
If history holds, here’s what we can look for next. Below is a 2 year chart of SMH (semi ETF). Each time the semis have reached the heavily oversold level that just occurred, the semis have used that oversold level as a springboard to new highs.
From the bear market lows, this oversold level in the semis has taken place 4 times, with an average move higher of 54% taking place next. We are aggressively long the semis.
VRA Bottom Line: it’s not possible to overstate this point; the semis lead…and the markets follow. Now that the lows look to be in place for the semis, we are staying aggressively long the market. From the 10/13/22 bear market lows our base case has been:
- We’re in the Roaring 2020’s
- This is a structural bull market, the most powerful type, led by an “innovation revolution” and our 5 Big Bribe Megatrends.
- This will prove to be a generational bull market, taking the Dow Jones past 100,000 and Nasdaq past 40,000. When we first wrote these forecasts the Dow was 24,000 and Nasdaq 10,500.
- Buying dips will remain the smartest of smart money strategies.
Our Quarterly Reminder; Listen to Permabears at Your Own Peril
Trumps Bitcoin Conference Keynote; The Crypto President
Trump did it on Saturday, becoming the first president to speak at a BTC Conference and the first to commit to establishing a Strategic Reserve for BTC. He’s still learning how to speak Bitcoin, but it’s clear that he’s all in. Trump said “Bitcoin is really about two words; America First”.
He’s right of course, but it’s bigger than even that; Bitcoin is about freedom. It’s already spawned 100’s of millions seeking individual sovereignty, globally…and now…Trump has been converted. He’s a bitcoiner, who has also committed to creating a Strategic Bitcoin Reserve. History will mark this event as a game changer.
Trump: “The United States will be the crypto capital of the planet and the Bitcoin superpower of the World.” This event will bring in millions of new voters for Trump.
I ran this poll on X over the weekend, with a common end result; not enough own bitcoin (with just 37.4% long). It’s the buying pressure from the non-believers that will play a major role in the coming move higher. IMO, once BTC passes $100K, the speed of the move will accelerate.
VRA Bottom Line: it matters not what price you pay for BTC today. Our focus is on the long term, with the scarcity value and skyrocketing demand for BTC, front and center. We’ll still be recommending BTC when it hits $1 million, to put things in their proper perspective.
Until next time, thanks again for reading…
Kip
Join us for two free weeks at VRALetter.com
Sign up to join us for our daily VRA Investing System podcast
