Weekly Technical Review - Union Securities Research Team - Union Securities Switzerland
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Weekly Technical Review Union Securities Research Team research@unionsecurities.ch January 26, 2021
Amazon from 1997 to 2009
In 1999, Amazon becomes the biggest online sales platform in the world.
The story: “Soon, we will not only be buying books and CDs online but about every kind of product and services”.
2005: Amazon launches
Prime membership
January 26, 2021 2
Cisco since 1990 In 2000, Cisco become the most valuable company in the world with a market cap of more than $500bn. The story: “Globalization and the internet will driven a boom of infrastructure spending for telecom equipment”. January 26, 2021 3
20%
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01/12/1995
01/07/1996
01/02/1997
January 26, 2021
01/09/1997
Communications
01/04/1998
01/11/1998
01/06/1999
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01/08/2000
01/03/2001
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01/12/2002
Cisco since 1990
01/07/2003
01/02/2004
01/09/2004
01/04/2005
01/11/2005
Equipment manufacturer in the world.
01/06/2006
01/01/2007
01/08/2007
01/03/2008
01/10/2008
01/05/2009
01/12/2009
01/07/2010
01/02/2011
01/09/2011
01/04/2012
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01/06/2013
01/01/2014
01/08/2014
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01/10/2015
01/05/2016
01/12/2016
01/07/2017
01/02/2018
01/09/2018
01/04/2019
01/11/2019
01/06/2020
The de-trended picture (vs 12Month MA) shows how Cisco (which was already a mature company in 1999) returned to a
“normal behaviour” after the 2000 crash. With a market capitalisation of nearly $200bn, Cisco remains the largest
4
01/01/2021
Orange since 1997
In 1997, the French government privatized France Telecom sparking a buying frenzy among French retail investors.
The story: “One day, everybody will have a mobile phone and a broadband internet connection at home”.
In August 2000, France Telecom bought Orange
Plc from Vodafone and rebranded the whole group.
January 26, 2021 5
Qualcom since 1992
In 1998, Qualcom spun-off its base station and cell-phone manufacturing businesses to focus on the high
margin patents and chip business.
The story: “The mobile phone industry will boom and devices will offer increasingly complex features requiring
more computing power”.
2007: Apple launches the first iPhone
January 26, 2021 6Microsoft since 1992 Even Microsoft, a good quality company with a large client base and a relatively stable business lost 2/3 of its value following the dot-com bubble. January 26, 2021 7
This time it’s different… and nothing can go wrong Citi Research "Euphoria/Panic" index … January 26, 2021 8
This time it’s different… and nothing can go wrong The Goldman Sachs index of non-profitable Tech stocks is going ballistic. According to the US bank, negative earnings firms account for 16% of equity trading volumes, exceeding the 15% share in 2000. January 26, 2021 9
This time it’s different… and nothing can go wrong And the GS index of the most shorted stocks in the US is clearly showing a huge short squeeze for investors trying to arbitrage this. Yesterday, we learned that hedge fund manager Melvin Capital had to be bailed out by Citadel and other funds or prop desks have probably been crushed. January 26, 2021 10
This time it’s different… and nothing can go wrong Short interest is reaching a multi years low meaning that when the market goes down those natural buyers will not be here. January 26, 2021 11
GameStop - Today
2021: Short sellers get wiped out. Citron
research is trolled, attacked and harassed
online (see CEO comment below)
2007: new offers to
download games online
2020: The company starts buying back its own shares and some
activist investors bet on the turnaround of the company. Bullish
analysts put target prices as high as $16.
“What Citron has experienced in the past 48 hours is nothing short of shameful and a sad commentary on the state of the investment community.
We will no longer be commenting on GameStop, not because we don’t believe in our investment thesis, but rather the angry mob who owns this
stock has spent the past 48 hours committing multiple crimes that I will be turning over to the FBI, SEC and other governmental agencies. This is not
just name-calling and hacking but includes serious crimes such as harassment of minor children. We are investors who put safety and family first,
and when we believe this has been compromised, it is our duty to walk away from a stock”.
January 26, 2021 12Volkswagen in 2008 Please remember that short squeezes can be extremely violent but stocks always come back to their fundamental value at some point. January 26, 2021 13
This time it’s different… and nothing can go wrong The graph below show a selection of Thematic ETFs and Baskets since July 2020. Most of those thematic basket are actually based on two of our favourite trends: The Digital Disruption and the Green Transition… but sadly, valuation on many stocks has become irrational. January 26, 2021 14
Asset Classes – Performance per Year
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
US Equities S&P 500 2.7% 18.4% 31.5% -4.4% 21.8% 12.0% 1.4% 13.7% 32.4% 16.0% 2.1% 15.1% 26.4% -37.0% 5.6%
Russell 2000 9.6% 19.9% 25.5% -11.0% 14.6% 21.3% -4.4% 4.9% 38.8% 16.4% -4.2% 26.8% 27.1% -33.8% -1.6%
NASDAQ 100 4.6% 48.9% 39.5% 0.0% 33.0% 7.3% 9.8% 19.4% 36.9% 18.3% 3.6% 20.1% 54.6% -41.6% 19.2%
Global Equities MSCI World 2.6% 16.5% 28.4% -8.2% 23.1% 8.2% -0.3% 5.6% 27.4% 16.6% -5.0% 12.4% 30.9% -40.3% 9.7%
MSCI ACWI 3.4% 16.8% 27.3% -8.9% 24.7% 8.5% -1.8% 4.8% 23.5% 16.8% -6.8% 13.3% 35.5% -41.8% 12.3%
EuroStoxx 50 0.2% -2.6% 29.4% -11.3% 9.9% 4.8% 7.3% 4.9% 22.7% 19.6% -13.1% -1.8% 27.0% -41.8% 10.4%
Stoxx 600 1.6% -1.4% 27.9% -10.1% 11.4% 2.6% 10.2% 7.8% 21.5% 18.9% -8.0% 12.3% 33.4% -43.4% 2.9%
FTSE 100 2.8% -11.4% 17.2% -8.8% 12.0% 19.2% -1.4% 0.7% 18.7% 10.0% -2.1% 12.7% 27.4% -28.3% 7.4%
SMI 2.1% 4.3% 30.2% -7.0% 17.9% -3.4% 1.1% 12.9% 23.9% 19.1% -4.6% 1.2% 22.1% -33.0% -1.4%
Topix 2.4% 7.4% 18.1% -16.0% 22.2% 0.3% 12.1% 10.3% 54.4% 20.9% -17.0% 1.0% 7.6% -40.6% -11.0%
Emergings MSCI China 15.0% 29.0% 23.0% -18.7% 55.6% 1.2% -7.7% 8.3% 4.0% 22.9% -18.3% 5.1% 62.7% -51.1% 66.6%
Bovespa -1.4% 2.9% 31.6% 15.0% 26.9% 38.9% -13.3% -2.9% -15.5% 7.4% -18.1% 1.0% 82.7% -41.2% 43.6%
MSCI Emerging Markets 9.2% 18.5% 18.8% -14.3% 37.8% 11.8% -14.6% -2.0% -2.3% 18.6% -18.2% 19.2% 78.9% -53.2% 39.7%
Bonds Euro Aggregate Bond Index -0.2% 4.0% 6.0% 0.4% 0.7% 3.3% 1.0% 11.1% 2.2% 11.2% 3.2% 2.2% 6.9% 6.2% 1.4%
Euro 1-3Y Bond Index -0.1% 0.2% 0.4% -0.2% -0.1% 0.6% 0.6% 1.8% 2.0% 5.0% 2.3% 1.7% 5.8% 5.8% 3.6%
US Aggregate Bond Index -0.5% 7.5% 8.7% 0.0% 3.5% 2.6% 0.5% 6.0% -2.0% 4.2% 7.8% 6.5% 5.9% 5.2% 7.0%
US 1-3Y Bond Index 0.0% 3.1% 4.0% 1.6% 0.9% 1.3% 0.7% 0.8% 0.6% 1.3% 1.7% 2.6% 5.0% 4.6% 6.7%
US High Yield 0.5% 7.1% 14.3% -2.1% 7.5% 17.1% -4.5% 2.5% 7.4% 15.8% 5.0% 15.1% 58.2% -26.2% 1.9%
Commodities CRB Index 4.0% -9.7% 9.4% -12.4% 0.7% 9.3% -23.4% -17.9% -5.0% -3.4% -8.3% 17.4% 23.5% -36.0% 16.7%
Gold -2.5% 25.1% 18.3% -1.6% 13.5% 8.1% -10.4% -1.4% -28.3% 7.1% 10.1% 29.6% 24.4% 5.8% 30.9%
WTI Crude Oil 8.7% -20.5% 34.5% -24.8% 12.5% 45.0% -30.5% -45.9% 7.2% -7.1% 8.2% 15.1% 77.9% -53.5% 57.2%
Dollar Index 0.7% -6.7% 0.2% 4.4% -9.9% 3.6% 9.3% 12.8% 0.3% -0.5% 1.5% 1.5% -4.2% 6.0% -8.3%
Hedge Funds HFRX Hedge Fund Index 1.1% 6.8% 8.6% -6.7% 6.0% 2.5% -3.6% -0.6% 6.7% 3.5% -8.9% 5.2% 13.4% -23.3% 4.2%
January 26, 2021 15Bitcoin Bitcoin remains volatile and overbought and is now losing momentum with a strong resistance at 38’000. It rebounded on 30’000 so far but we expect further pullback to the $22’000-$’25’000 range that would offer a great opportunity to jump in. January 26, 2021 16
Bitcoin & S&P 500 Bitcoin and the S&P 500 (shown in a log scale for more clarity) tend to be both linked to risk aversion and have similar turning point. January 26, 2021 17
S&P Futures - Daily The S&P 500 remains in a tight trading range and is facing some headwinds in 2021 including of course its very high valuation. We recommend to keep a neutral position as the earnings season is unfolding. January 26, 2021 19
Nasdaq 100 - Daily The Nasdaq is in a similar pattern with an even higher valuation, especially on some highly speculative stocks. It attempted a break out ahead of a big week in terms of publication but remains so far within its range. January 26, 2021 20
FAANGs - Daily FAANGs are making new highs ahead of a batch of major publications this week (Microsoft, Apple, Tesla, Facebook, Visa,…). January 26, 2021 21
US Banks - Daily US Banks confirmed their reversal and are dragging value stocks down in a sign that the market starts to take into account some downside risks to the economy. January 26, 2021 22
Global Activity Bloomberg indices see a new drop of economic activity following the Christmas break. January 26, 2021 23
Large Tech stocks
Market Cap in $Bn 50D 100D 200D The table shows the distance of a
S&P 500 Information Technology $ 9'228 -6% -10% -17%
Apple Inc $ 2'428 -13% -16% -27%
number of tech indices and large
Microsoft Corp $ 1'722 -5% -6% -10% tech and media stocks to their
Amazon.com Inc $ 1'680 -5% -5% -11% moving average (expressed as a
Alphabet Inc $ 1'299 -8% -13% -19% potential downside).
Tesla Inc $ 832 -26% -39% -56%
Facebook Inc $ 792 -2% -3% -10% Most of the large Tech stocks
Visa Inc $ 481 5% 3% -1%
remains well above their long
NVIDIA Corp $ 341 -4% -4% -18%
Mastercard Inc $ 323 4% 3% -2%
term trend with some significant
PayPal Holdings Inc $ 296 -12% -18% -27% downside risk.
Netflix Inc $ 249 -10% -10% -14%
Adobe Inc $ 228 1% 1% -6%
salesforce.com Inc $ 208 2% 6% -7%
ASML Holding NV $ 196 -16% -24% -29%
Accenture PLC $ 167 0% -5% -12%
SAP SE $ 129 -2% 8% 13%
Zoom Video Communications Inc $ 116 -1% 8% -18%
ServiceNow Inc $ 107 -3% -7% -18%
January 26, 2021 24Russell 2000 - Daily US Small Caps continue to grind higher, with a signification contribution YTD from highly valued stocks or stocks caught in a short squeeze such as Plug Power, Game Stop, 3D Systems, Bed Bath & Beyond,… January 26, 2021 25
Russell 2000 – Debt-to-EBITDA Among signs that the market is too complacent, we note that the credit quality of US small caps has declined sharply in 2020 as measured by the ratio of Debt to EBITDA. January 26, 2021 26
EuroStoxx 50 - Daily The EuroStoxx is still hovering around 3’600 amid rising risks of more lockdowns for longer in Europe and a negative impact on the economy. Stay tuned. January 26, 2021 27
EuroStoxx 50 – 240 minutes Over the very short term, the EuroStoxx broke out of its two weeks trading range. January 26, 2021 28
Style rotation in Europe The reversal of value and cyclical stocks seems to point to higher risks of a double dip recession. January 26, 2021 29
Europe vs US This rotation towards growth stock stopped the relative rebound of European stocks versus the US. January 26, 2021 30
Nikkei – Weekly The Nikkei remains in the 27’500-30’000 range. We see a strong resistance at 24’000 that can be used as a barrier level to sell puts on the index. January 26, 2021 31
MSCI China – Weekly China’s economy is outperforming the rest of the world during the pandemic and Chinese stocks are confirming their major breakout. January 26, 2021 32
MSCI Emerging – Weekly The MSCI Emerging Tracker is also making a major breakout amid a broad based rally (Korea, Mexico, Brazil, Poland, …). January 26, 2021 33
Risk Appetite and Extreme Price Actions
Our Risk Appetite Index remains in a risk appetite level. Once again, a number of risky assets (Bitcoin,
Emerging Equities, Semis, High Yield, etc…) are at very high levels and are at risk of some profit taking.
2 4000
3800
1
3600
0
3400
Sep-18
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Jan-19
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Nov-19
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Aug-19
Aug-20
Oct-18
Dec-18
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May-19
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3200
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Risk Appetite Index S&P 500
January 26, 2021 34The US Long Bond The US Long bond held on its support level and is likely to rebound further especially if risk aversion returns. This resistance level is important as a drop below 169-167 would be negative for equities especially for those with a distorted valuation. January 26, 2021 36
US Corporate Bonds Investment Grade bonds in the US (in blue) have outperformed High Yield bonds thanks to their higher duration (9.8 vs 3.7) amid a falling bond yields environment. The rebound of bonds yields is affecting Investment Grade bonds first but should also weight on higher risk bonds at some point. January 26, 2021 37
US High Yield US High Yield credit spreads remain tight and do not reflect the decreasing quality of issuers, the upcoming boom of bankruptcies in 2021 and the risks facing the economic recovery. Be cautious January 26, 2021 38
The Dollar Index - Daily The Dollar Index failed to break its intermediate resistance at 91 and retested 90. We still expect a rebound to 92 as a first target. January 26, 2021 39
The Dollar Index - Monthly On a longer term picture the Dollar Index remains close to a major support level. January 26, 2021 40
The EUR/USD - Daily The Euro rebounded on its 50D MA but investors continue to rebuild Dollar positions (see next page). A close below the 50D moving average would clear the path to a 1.19/1.185 target. January 26, 2021 41
Emerging Currencies A number of emerging currencies are turning around (BRL, MXN, RUB) as can been seen in the JPM Emerging Currencies Index. January 26, 2021 42
Citigroup EUR Positioning Index Indices confirm a reversal of positioning on the Euro -> Stay tuned . January 26, 2021 43
Gold – Daily Gold continues to hover around its 200 days moving average with little direction. January 26, 2021 44
Gold – Monthly On a long term picture, Gold is coming from a nearly 10 years correction and has the potential to make a $900 breakout in the coming months with a $2’750 to $3’000 target. January 26, 2021 45
Gold & S&P 500 On an even longer term picture we see that the value Gold to the S&P 500 is very low and has ample room to rebound. January 26, 2021 46
Silver – Daily Silver is in a similar short term pattern and is hovering over its 100D and 50D MAs. January 26, 2021 47
Crude Oil WTI Crude Oil failed to break its $54.5 resistance and may weaken along with risky assets. Long term, we believe that structural imbalances between supply and demand will support prices. January 26, 2021 48
Copper Copper remains supported by supply/demand imbalances. Shorter term, it could pullback along with other risk assets but now has a very strong support level at about $320. January 26, 2021 49
CRB Commodity Index The CRB index failed to break resistance level as expected. It should pause for now as the index is overbought but it should ultimately break out in 2021 as the global economy recovers. January 26, 2021 50
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January 26, 2021 51Disclaimer
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