07.01.25 - Fading momentum in (over)crowded trades

A notable shift in direction today in some of the most crowded trades like Palantir, Tesla, AppLovin, Nvidia etc. These stocks have been key drivers of Nasdaq’s recent rally. Today, after Nvidia set a new all-time high right after the opening bell, the positive momentum faded away and a wave of profit-taking set in as investors moved to lock in some gains.

Markets: Nasdaq Index with another significant move, dropping more than 1%. Cryptos heavily down. Interest rates are rising, faster on the longer end with the US 10-year yield close to 4.7%. European stock indices for once in the green. Gold and the US dollar gain ground with increasing uncertainties.

My View: The washout of crowded trades can be seen as both healthy and necessary, providing a reset for stocks that have experienced significant momentum. While a pause is a natural market response, the duration and severity of this pullback remain uncertain.
I took the opportunity to increase my exposure to US long-term Treasuries through an ETF, viewing it as a tactical investment move. Additionally, I took a short position on semiconductors today via an ETF, targeting a short-term investment opportunity.
I am also maintaining my short positions but have adjusted the stop limits lower to account for a potential rebound.

Become a member to access more valuable market updates like this.