Welcome to the free State of the Market report for the Art of the Bubble! Our subscriber plans make use of the same base algorithm that our crypto hedge fund, 1.2 Capital, does. It’s modified in timeframe and weighting so you don’t have to stare at your screen all day long. In 2022, for cryptos, the Dynamic Algorithm outperformed its benchmark by better than 70%. In 2022, for stocks, the Bubble Portfolio outperformed its benchmark by better than 40%. For those of you who are accredited investors, 1.2 Capital has re-opened new investor onboarding. If you are interested in learning more please reach out to us here.
How To Read The Report
Sentiment Scores use ChatGPT as part of the AI tech stack to rate stocks or sectors.
- Scores range from 1 (worst) to 7 (best).
- These are short term scores (ideally updated daily)
- A 3.5 is a minimum score for a long strategy.
The Macro Situation
A strong end to Q2.
Markets began the week pricing in the Fed’s more hawkish plans around increased interest rates over the year and then saw upward momentum due to a Chinese stimulus package and the report that Q1 saw 2% growth in GDP for the US.
But along with the good news of economic resilience is a not-so-good sign that jobless claims appear to be decreasing. If wages begin to increase, the Fed will be pressed to revisit their inflation dampening strategy. At least a 25 bps increase is on slate for July.
We’re seeing gains across a broader swathe of companies. QQQ is being outperformed by SPY and RSP. This may indicate a shift to a more sustainable rally.
In the meanwhile, the housing market is suffering the most. Current homeowners are not wanting to sell due to unfavorable mortgage rates on new homes.
Gold and silver are up and down as confidence in the US dollar is mixed. Mid- to long-term bonds are suffering as money moves back to stock investment. Case in point: JP Morgan is “unwinding their long position in five-year Treasuries.”
Oil will be the main beneficiary of the current conditions, as once again the fear of recession is pushed further back.
We’re seeing gains across a broader swathe of companies. QQQ is being outperformed by SPY and RSP. This may indicate a shift to a more sustainable rally.
Macro-Dependent Tickers
- Long-term US Bonds: TLT - sentiment score 4 (totally neutral)
- Medium-term US Bonds: IEF - sentiment score 2.5 (ouch!)
- Gold: GLD - sentiment score 3.3 (ouch)
- Oil: SLB, XOM, VLO, RIG - sentiment score for oil: 4.8
Stock Watch
Tesla is still trending well, but there may be signs of a bubble. ARK Invest EFT has followed Citadel hedge fund in selling TSLA for tech stock. Citadel bought QQQ; ARK sold $7M in TSLA for AMD.
Though the tech sector is benefitting from a resilient macroeconomy and the AI boom, price adjustments are in the offing due to the regulatory battle between China and US. Export-import restrictions will have a dampening effect.
Artificial Intelligence
- Sector Lead Indicator - QQQ - Sentiment Score 5.3
- Tickers: NVIDIA, MSFT, GOOG, META, AMZN, MU, AMD
Green Energy
- Sector Lead Indicator - TSLA - Sentiment Score: 4.71
- Other Tickers: PLUG, GOEV, NIO
Crypto Watch
Crypto narratives are lean these days with regulatory measures in a holding pattern. AI cryptos have been declining but may be poised for a comeback given the larger macro environment.
The XRP-SEC case may take a full 6-month span to conclude, which would mean a decision would be announced in early September. Sentiment and the price of XRP had been waning until whales bought $170M of the coin.
BTC remains above $30K, with signs that it may face resistance to go higher as short-term holders sell. An estimated 1.28% (+35.4K BTC) has moved into exchanges. BTC suffered a flash crash on Friday when it dropped to $29.8K due to negative news that the SEC is not happy with Bitcoin ETH filings.
Crypto Narratives:
- Sector Lead Indicator - TOTAL / BTC - Sentiment Score 4.36
- Bank Safety: BTC, STX
- XRP-SEC: XRP
-Todd Mei, PhD and Sebastian Purcell, PhD
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This newsletter was created by The Art of the Bubble/1.2 Labs and is provided for educational and entertainment purposes only. You should expect no financial returns one way or another based on the statements contained herein.Robin Technologies and Analytics LLC is the firm that distributes The Art of The Bubble products. The firm does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Robin Technologies and Analytics LLC registered as an investment adviser or broker-dealer in any jurisdiction.
