Is It Time to Fade Semiconductors?

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1:24And now to the top analysis of today's markets. Is it time to fade semis? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Dale Pinkert, trading coach at TraderGateHub. Hi, Dale. How are you? Hi, Maggie. Great to be back with you. Quite a turnaround Tuesday we've had today in the S &P. Yeah, it seems like a risk-off day. We had right out of the gate JPMorgan Chief Jamie Dimon saying banking crisis is not over. Warning, there will be repercussions to come for years. We had weaker economic data, which is kind of added to the concerns. So we saw stocks down, yields down, dollar down.

2:04You know, when you look across the markets, what's of most interest to you? What are you paying most attention to right now? Well, I think the levitation of S &Ps could be coming to a close. The magic act may start to resolve itself to the downside. I've brought some charts from the belly of the market to show that besides semis, and semis, I believe, also had a down day. When the leadership begins to falter, the things that have been lagging accelerate to the downside. So these charts were put together a few hours ago before the sell-off became even more intense. So you have things like cat and deer and Freeport.

2:48And, you know, for example, there's cat. Yeah, let's focus on one at a time. So what is that cat? That's Caterpillar. What is that chart telling you? Why'd you pick that one? After that last break that we had, and Cat was one of the stronger issues, it didn't peak when the general market peaked. It peaked several months later. And this big break that we had on the SVB held a very important moving average. But the action afterwards is for Cat, what I call a dead Cat, bounce, where you had a very directional move to the downside. And just a simple little correction, not even coming close to recapturing the losses like the S &P did because of leadership in NASDAQ.

3:37So this is a bad sign for the global economy. When you think cat, you think tractors, you think construction, you think building, the real economy. And with what happened in credit contraction about to take hold, cat and deer, big companies, the real economy, not service economy, not clouds, but things that, you know, we live in and work in. And so this is not a good sign for the market. And I think we could be marking a significant high in the S &Ps that could lead us if we take out 3 ,800 to finally taking out the October lows and having the capitulation that a lot of the bears have been waiting for sometime by July, June, July.

4:31Wow, taking out that October low. A lot of people thought we'd put that conversation behind us, Dale. Yeah, they said no landing. I say, put your helmet up. So are you seeing, is it in the wake of the SVB? Because we've known that the Fed's been hiking aggressively. We've had people warning about the fact that the recession was coming. We've seen the ISM declining for five months. Everybody who knows Raoul knows he watches that really closely. We've done a lot of stuff on that. If you want to dig in on the importance of that indicator, head over to our platform. He just had another big session with Julian.

5:12They did a big breakdown on that. So we've kind of known this is coming. Why are we seeing this break now? Is it because of what was the regional banking crisis, the kind of final straw that made people really concerned about this? Yeah, the tightening even went on before that. So he tightened until something broke. Well, something broke. And you know, it's like that. You ask, well, why didn't the market recognize it earlier? And you know, you reach a tipping point where it's that last snowflake that causes the avalanche. And this wasn't exactly a snowflake. I don't believe that we've solved the liquidity problem 100%, but the concerning part coming up is credit contraction and monetary conditions tightening without the Fed raising rates.

6:04If you can't get credit, does it matter where rates are? Yeah, that's what we may be looking at coming down the line. That's a great point, Dale. And we've had people coming on being really clear about this concern for weeks now. And even yesterday, we talked with our guest Mustafa and said, it makes me nervous when people say it's contained because very smart people have been worried about this knock-on effect that would have on credit. Peter Bukvar is going to be on later in the week. I think it's been a month since we talked when we warned about the reset on these higher rates that what that would do.

6:39And I think we all are anecdotally feeling it. So I'm interested, you think this isn't going to just knock the industrial sector, those exposed? Do you see this coming for tech too? If you see the S &P going down, are we going to see a capitulation in technology? Because boy, that has been on fire for this year. We're going to see a capitulation or at least a downdraft in every asset class except treasuries and later on maybe the dollar. Because when you're in this type of situation and things are weakening, I think Bitcoin is short on any further strength towards$30. I think we could go to$18, maybe even a retest of the lows.

7:25I think that gold is completing today. okay at this 2020 level may have another update or so uh but when i was on i said bye at 1804 i actually brought the gdx chart and that's had uh it's really they've been the stars okay uh last time i was on we were about the 31 area i said bye between 27 25 and 26 and change was a low here we are at new highs so this is where people get fomo and this is instead where people should be get uh become tactical and if you're fortunate to still hold it i got out when the gdx was trading about 29 28 and a half um early and that you should be ringing the register on part of your position i'm not saying that this is the high in gold or silver i'm saying that it's going to be affected by sell-offs in the other asset classes.

8:31If I'm right about the market, sometimes you sell what you can, not what you want to. Yeah, interesting. So let's break this down. Okay, we got your sort of overall view, and I think that loud and clear message should put our helmets on. So let's break this down a little bit. Let's go back to technology for a second. So we were talking about everything's going to get hit. We started the show with the question, should we fade semiconductors? So you think it's all going down. Does that include semiconductors? And I think everybody listening knows NVIDIA has been, I mean, first of all, the sector's been high, held by that.

9:11But NVIDIA is up, what, almost 100%, 90-something percent since the beginning of the year. It's been just a freight train. So semiconductors look vulnerable here to you. Yeah, there's the semi-chart. If you put it back up there, you'll see that these recent highs are not confirmed by momentum. Of course, you know, I prefer to short the weakness and buy the strength on dips, but I do believe semiconductors will sell off. And what's going to be interesting about this is I'm looking for a pretty good rally in the bond market. I think 10-year yields are going to head towards 3%. And people are going to say, well, you know, if the bonds are going to rally, if you put up that chart, it's called an ascending triangle.

9:58Okay, wait, this is TLT we're putting up, correct? Yes, TLT. And the implications of that formation are bullish. Just like a descending triangle, the implications are bearish. This is the reverse and a breakout over 109 is going to get you 117, maybe 130. And the surprise is going to be people are going to say, what's wrong with the market? Rates are going down and it's not helping the market. The weak dollar didn't help the market today. Nothing helped the market. So we talked about this a show or two ago that the narrative is going to shift from worrying about inflation to having a growth scare.

10:44And you could have lower rates and lower equity prices at the same time during a growth scare. Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus 500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity? You'll be able to trade it in just two clicks. Feel ready?

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12:03Yeah, people were forgetting it. We were locked into that, oh, bad news is good for equities, just up until the last couple of days. When you're looking at, when you think that the 10-year is going to go to 3%, what about, you sort of partly answered, but what about inflation? Do you worry about persistently high inflation, even if you see growth down? Some people call it stagflation. Some people have issues with that phrase. I do. You do think that we're going to see that persistent inflation. Yeah, because eventually the Fed is going to have to cave. They may not cave yet. But after 3%, I could see yields rallying back to new all-time highs.

12:44Okay, that's important. So this is the time frame on treasuries, on this treasury trade, is what, like a three-month time frame or six months? and you know it doesn't take long there are things called uh crashes and you could get impulsive moves that could complete in seven weeks so it's not going to be a a duration trade in fact i think once uh the s &ps trade down towards 33 and a half to three thousand that we'll be setting up the stage for a rally into uh for new highs into 2025 so that's why it's very important for people to be shepherding their resources now because there's going to be a time where you could be low on everything, including precious metals and equities.

13:32But we have to have this cleanse. It's taking place and it'll be compressed in time. And, you know, that's my view on how to trade the market is either be in cash or be short. So from what you described, it sounds like we could be setting up for a situation where bonds end well we would have stock selling off but but but you in the short term you'd have bonds rallying so they would be in a different direction so that classic diversification would help you in the short term right flight to quality uh which disappeared last year in fact the bonds led the way down the last couple sell-offs money flows have been going back into bonds as a haven gold and bonds have been the havens so uh but i think that gold could be vulnerable to risk off as the dollar finds its footing maybe around par uh get a little you know markets like big round numbers and a hundred's a big round number and perhaps we get a little panic underneath that in the next few weeks and i i wouldn't get uh long uh the euro up here near 110 i think we're within 100 pips or so of the top there.

14:47Okay, hold on. Before we get to currencies, we love when you come on, Dale, because you can talk about everything, which is fantastic. But let's make sure everybody catches all this. I want to go back to gold again. So Samuel sat down with Lawrence Leppard on our Three Ideas show who talked about gold. It was one of his calls in the beginning of the year. It did very well. And then he had some more deep thinking about it. Let's have a little listen to a clip from that and we'll talk on the other side. And so, you know, rule of thumb is always bet if gold goes up 10%, the gold stocks will go up 30%.

15:21And so, you know, if you want to be more aggressive in your approach to this debasement bet, you buy gold stocks. And my fund, I sell my fund to my investors as, you know, I'm extremely aggressive. I'm trying to make high rates of return, and they should allocate money to it that they consider they can live with the volatility because it does go up and down, you know, quite a bit. But if we're right, and I believe we are, about what's happening in the basement, you know, the gold price is going to go much higher, in my opinion, the next few years ahead. And that full interview is available on our platform.

15:56In fact, you can track the performance of all of the guests on Three Ideas and see how they're doing. And if their suggestions are working out, if you're not a member, scan that QR code and come join our community. So Dale, let's go over what you're talking about gold. And I want to be clear whether you're talking about gold or gold miners here. I think the chart you brought was GDX. Is that right? Right. The miners. The miners. Okay, great. So do you prefer owning the miners or do you worry about the volatility there? What are you thinking about the physical commodity versus the miners? Walk us through on that a little.

16:32I think it's right now a little clearer for me in the physical. and I believe that if investors and traders are patient that sometime by June or July you'll be able to buy gold back under 1900 maybe as deep as 1860 possibly even 1800 again so you know I'm looking for a pretty good break in gold silver I think maybe it peaks around 25 and a half could pull back to 22 21 and a half and that's going to be because there's going to be some safe haven buying of the dollar that eventually is going to pressure gold in fact i look at gold today and on the daily we're not confirming ellioticians would call this potentially a wave five five of five completing today that's not a market you buy that's a market that you don't get fomo if you miss this last trade, you're patient and you wait for the market to come back to you in a few months and get it to better levels.

17:38Against a backdrop of stock selling off and taking out those October lows, you are worried about a sell-off in precious metals because you think people will be liquidating what they can. Is that where that pressure is going to come from? It's going to come from margin calls. is going to come from people that just have to liquidate something. And the pressure of this stock sell-off, I think, is going to be, we've had a liquidity crisis with the banks, regionals, and now we're going to be looking at the potential of a liquidity crisis in the financial markets being reflected by lower prices. So you'd sell everything.

18:26Yeah. That's a frightening scenario. Do you think the Fed is going to have to cut rates? We hear them jaw-voting about inflation still or talking about pausing, but the market's telling us they're going to cut rates. I'm not sure because we're almost at 3 % on the 10-year, and that's the floor. So that's only about another 30, 40 bps from here, unless I'm wrong and we're going to 2. so uh i think the most they'll do is pause so instead of people looking for cuts they should be looking for the fed to pause for a while and let things settle out in the markets see how the markets handle things and then i i'm not so sure that they're not going to have to uh enter another hiking regime because of what's happening with OPEC.

19:21They've done us no favors. Crude looks like it could go to$95. Besides economically sensitive commodities, things like grains and food, they all look positive. The inflation fight is not over. This is more of a market event than victory over inflation. That's a great way to look at it. That's a really important sentence you just said. I want to jump into a couple of questions. John asking, Dale, small caps are underperforming big time. Can you talk about the small caps relative to the large mega caps? Yeah, they should be the first to bottom. They'll bottom before the S &Ps and he's right. They are severely overvalued, and I think they're going to lead the next bull market in equities once we finally get this washout under$34 ,000 or$3 ,500.

20:19Not now. Be patient. If he pulls up his chart, there's almost a three-drive formation setting up on the dailies. So there's more downside in the Russell and IWM, not as much as there is in balloons that haven't been deflated yet. There's more air left in the queues, more air left in the spoofs. I love it. Lena asking about Ethereum. Not sure if you track that, but I think you mentioned you were negative on Bitcoin. And it sounds like you think they're all going to trade like risk assets and get hit. Yeah. And Ethereum, she's asking about it because up until two weeks ago, it was the laggard, the follower.

21:05And lately, it's been demonstrating more relative strength. I can't imagine Ethereum being unscathed if we're going to have a big break in Bitcoin to at least$18 ,000 and possibly a retest of the lows. I know some people are even talking$14 ,000 to$9 ,000. and I'm not a Bitcoin hater. I've been on the program talking about buying it at 18, buying the pullback at 20. But this event in equities, I think, is going to overshadow fundamentals. You have to go with the price action and I don't think any asset class is going to be unscathed. Some will hold up better than others and not make new lows. For example, the gold stocks.

21:52I don't think they're going back to their lows. Gold, I don't think it's going back to their lows. Silver, I don't think it's going back to$20. But they're going to give up recent gains while the S &Ps are making new lows and other asset classes are making new lows. And Dr. Copper is pretty good at forecasting economic weakness. It's been trying to go higher for months. Every rally is aborted, every break holds, but I think it's resolving itself to the downside here. So I think lower copper, higher bonds, a whiff of deflation in financial markets. We're going to take another quick break to hear a word from our partners.

22:36We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

22:45so max asking for just a little clarification again on on gold max max is very happy today because he loves to ask about gold and semis so we got you today max uh dale gold to break ath here or fade the break above 2000 fade the break above 2000 that comes later new all-time highs in the fall. Trillion X saying, what do you think will break in the coming credit crisis or market event? It sounds like you think certainly stocks, but anything else? Well, one of the three asset classes, stocks, bonds, I think bonds are going to be the go-to place. I think that we're going to have a nice dollar rally from parity or around that level.

23:35I'm talking about that we could still see whenever the euro tops that we could still see it near parity. So there's going to be a big move in FX back to the downside, but above the lows that we had set a year ago. So that's going to be a great buying opportunity. But there's nothing I really want to be long in this environment. Sell the rips and wait for this capitulation to take place and momentum divergences begin to appear. It's prudence over valor right now. We just have to have a tea shop store just for Dale, for sure. For the wisdom you drop on us all the time. We're going to make that happen.

24:23I've tried valor many times. Prudence is a, you know, there's nothing weak about knowing that there's danger in taking cover. Yeah. And that certainly feels like we've been here a lot. So Timothy asking, so Dale, do you see sub 3 ,200 on S &P? I think that's right around the level that I'm looking at. I know some people have targets around 2 ,900, but anywhere from about 3 ,300 to 3 ,000, I'm going to start putting out my buy list and things that I want to buy in those levels. Down the line, I'll be able to pinpoint it, but general area, 33 and a half, and then possibly 32, 3 ,000. From there, it's just going to be fractions.

25:14I just have to get the part of this being right. And then down there, be patient and see which is holding up. What stocks, what sectors, what asset classes are starting to put in higher lows rather than lower lows will be your first sign of a bottom. So, John asking what's probably one of the hardest questions, what is the timing of the sell-off? So it feels like we're heading in that direction. Maybe it started today, but what do, what are you thinking in terms of timing on this? Do you have a sense of that? Yeah. Late June, early July, maybe around the, you know, we'll bottom and get some type of summer railing.

25:57So I'm thinking we're down into late June, July, and then the market begins to repair and heal itself. Uh, yeah. And then a reminder to everyone, we have the whole debt ceiling debacle happening. That's going to be part of it too. Yeah, sometime. And the timing is unclear on that, by the way. June. June, the market's going to be, I think that's going to be the catalyst for the last big decline in the market is a lack of confidence that it's going to get done. And even if it does get done, I mean, the tragedy is we weren't able to reload our SPR when oil was trading in the low 70s and 60s because we don't have a debt ceiling.

26:43And now the crude price is going to be in our face all the way up to the mid 90s, maybe higher. And what do we have left in our strategic petroleum reserve? I don't know. We sure sold a lot. and we couldn't cover our shorts. So the U.S. government is not a good trader because they don't know when to take profits. Yeah. The thing is probably the understatement of the year so far. They were short good at 120, 130 when they opened it up, but they can't cover their short position. Because for some reason, yeah, the wife closed the account on the government. uh we have a question julian likes ief does coach agree besides tlt i'm not familiar with that atf but if it's going to perform with lower yields um of course and is that uh your treasury bond oh okay so i would be taking profits when you see 10-year yields around three percent Okay.

27:53I want to ask you a question about, so what we were just talking about, is the market prepared for this? Because we've seen equities rallying, everyone going back into tech. Is the market mispriced for this potential takeout of October lows? Are people prepared for that in any way? I don't think they are, because I think a lot of people are talking no landing uh you're even starting to get the melt up people coming back their narrative about new all-time highs which i agree with just the timing i don't agree with uh that we're going to have one more decline and they could be right as like always i'm wrong on this s p trade on closes back about 4 200.

28:42so not that far above today's highs so uh you know I don't walk on water. I make mistakes. I'm wrong in the markets. I miss trades. So really, the only thing I could control is risk. And if the S &Ps start trading back over 4 ,200, know that I'll be changing my mind. So be prepared to change your mind if price action changes. But I have pretty high conviction about this scenario happening because it needed to happen. And I think that we're finally going to get the fire sales that everyone's been looking for down there around that, you know, 3 ,000 level in the S &Ps. Yeah. And thank you for saying that, Dale.

29:38And it's something we emphasize all the time, right? Dale is being awesome about sharing his views on all of these things, but this is always about probability and everyone has to react to new information coming in. And this is not a recommendation. He doesn't know your risk profile or your, you know, what you need. This is information for you to take to try to make your own decisions and plug into your own framework. This isn't advice from him or from us. That's always the caveat we give every time. And any time before you get into a trade, you should know your risk. You don't get into a trade and go, well, I'll just watch it, see what happens.