Summary
Highlights
Gareth discusses the current downturn in chip companies, specifically highlighting Micron's 36% drop from its peak. He attributes this correction to market's forward-looking nature (12 months out) and companies trying to maximize existing memory due to high prices. Despite a short-term bounce, he predicts a potential 75% downside for semis long-term, based on historical patterns of new technologies like AI.
The NASDAQ is showing a topping pattern with lower highs, though not yet lower lows. Soloway notes that mega-cap stocks like Apple and Microsoft have cushioned the NASDAQ's decline, but he anticipates a rotation out of these as well. He believes an economic weakening towards year-end will trigger a larger sell-off once these mega-caps begin to falter.
Soloway expects at most one rate hike from the Fed this year, with potential cuts as early as next year due to anticipated economic weakness. He believes the Fed Chair faces political pressure to avoid aggressive rate increases, especially with an election cycle approaching. This stance contrasts with the Fed's tough talk, which he views as posturing.
Institutional money is rotating out of semiconductors into stocks like Apple, Microsoft, and Meta. Soloway emphasizes that extreme analyst price targets after significant runs (e.g., SanDisk, Micron) are top signals, not buy signals. He also points to the hype around SPACs and IPOs, like SpaceX, as indicators of market tops.
The S&P 500 has shown more resilience than the NASDAQ due to its diversification. Soloway identifies 7,300 as a critical support level for the S&P 500; a break below this could lead to much sharper declines. He downplays oil's recent impact on market volatility, asserting that a sustained oil price above $100 would force the Fed's hand, but he anticipates oil prices will fall by year-end due to political pressures.
Soloway agrees with downgrading extreme gold forecasts. He sees a potential final flush down to $3,500 for gold, which he views as an attractive long-term buying opportunity. He highlights a wedge pattern on gold's chart, indicating a potential explosive move in either direction. Breaking below $3,900-$4,000 would lead to $3,500, while a break above $4,150 could send it to $5,000.
Soloway identifies a bullish inverse head and shoulders pattern on Bitcoin's chart, suggesting a near-term rally to $71,000-$72,000. He notes Bitcoin's recent outperformance against other asset classes as a positive sign. However, a drop below $58,000 would negate this pattern and could send Bitcoin down to $50,000.
The S&P 500's key support is 7,300; below that, it could drop to 7,000 or even 6,300. For the NASDAQ Composite, 25,000 is a critical level; a break below could trigger a rapid decline to 24,000. Soloway does not expect yields to rise significantly further, predicting they might even decrease within the next 3-6 months as the economy weakens, limiting the Fed's ability to raise rates aggressively.