"The correlation between the Big Tech stocks and the rest of the S&P 500 is low, compared to history," says a recently published Barclays note. I kind of agree.
The big guys are right once in a while. But the note goes on to say that Big Tech/S&P 500 correlation actually spikes when markets sell off. That sounds like trouble to me, particularly because I see us on the edge of a volatility breakout. We’re seeing a monster, inflationary rally in stocks right now, with so many names stuck near 52-week highs.
Investors are just plowing ahead with no worries about anything. It’s like fear has disappeared from the markets entirely. The VIX has, with a couple of exceptions, been in the basement for weeks and bonds are hovering near lows - a sign that the market just doesn’t give a damn right now.
But… I’m watching for increasing correlation between big tech and the S&P 500. That’ll be “The Sign” that all hell’s about to break loose. We’ll talk about why in just a minute. We’ll look at how we did with our expected 82.28 move this past week and handicap next week’s EM, too. Let’s get started…