The Melt-Up Has Happened: Now It’s Time for the Crash

investing.com:

A lot of people on Fintwit mistake me for a permabear, especially in the current market. In reality, I’m just following the signals wherever they lead. Yes, I like to poke the NVIDIA (NASDAQ:NVDA) bulls on Twitter, but from a standpoint of intermarket signals and risk management strategies, I couldn’t care less what happens to NVIDIA. It’s actually a perfect example of why we need to pay close attention to quantitatively-driven, emotionless signals to try to get out ahead of what might happen next.

Because I’ve talked about the dangers of the mania surrounding AI and the FAAMG rally (which a lot of people don’t want to hear about in the midst of this move higher), they’ve slapped me with the permabear label. The truth is that I said conditions were favoring a risk-on melt-up all the way back in the first half of January of this year.

The reasoning was multi-fold. From a broad perspective, risk assets tend to do well in pre-election years, so that positive backdrop was in place. From a signal perspective, the lumber/gold ratio slowed the bleeding and started turning higher again. Small-caps started to outperform. Utilities and consumer staples dropped. Even Treasuries got in on the action right out of the gate in January before leveling off later. The point is that the risk-on/risk-off pairs were developing a consensus position that the market was setting up to move higher. I said that conditions were beginning to favor a melt-up and look what happened next.

Led by the FAAMG rally, the S&P 500 is up nearly 20% on the year and the Nasdaq 100 has gained more than 40%. Utilities (NYSE:XLU) are actually still down on the year and, while the Russell 2000 has lagged large-caps, it’s understandable given how narrow market