...the market has forgotten the simple rule: when long term rates go up, tech goes down. The reason is that tech stocks typically expect cashflows or larger cashflows to be derived in the longer term but when longer term rates go higher, its resultant NPV would be lower.
...this is why this is a retail led tech rally. Momentum trade. And we know what momentum trade does. It fizzles out quickly when the tide turns.
Yesterday Barron's wrote that the Nasdaq has entered a new bull market. Using the standard definition of 20% that's true. But here we see the Nasdaq lost -25% from the top and has gained 25% from the bottom, but it's still below the prior high. Why? Because many bulls don't understand that a 25% loss requires a 33% gain to breakeven.
A -50% loss requires a 100% gain to breakeven.
Which is the target for this head and shoulders top.
