<p>Happy Tuesday traders. I hope everyone is enjoying the new week at the casino as we begin to wind down 2024 and look towards the new year. In the Weekly Outlook I mentioned how we could see weakness in the indexes, and how it would be a buying opportunity. Specifically, I mentioned how a hot CPI print would likely trigger a sell off in equities, and that was the dip I want to buy.</p><p>Yet we saw weakness <em>leading into </em>the vol event (CPI), which is not the ideal bear scenario, imo. Can equities sell off further post CPI? Absolutely. However, it’s no longer the pain trade as I see it, and in fact the pain trade now is a sharp reversal higher, after the weak close on Tuesday trapped shorts overnights. Will this occur? No idea. But it is a scenario that emerged after Tuesday’s session. </p><p>If there is a sell off from CPI on Wednesday, my desired long entry that I shared in the Weekly Outlook remains the same. </p><p>Moving on…</p><p>I’m seeing lots of talk about chips lately, and with semiconductors always being a popular sector amongst traders, I’m not surprised when I see folks pressing the buy button. And yet.. the trade isn’t working. Even after AVGO rallies +9% last Friday, all those gains have been lost in just two days. AMD broke down to lows not seen since August, and NVDA remains a dud while other Nasdaq heavyweights soar higher. Why is there no life in chips?</p><p>They’re a highly cyclical sector, prone to booms & busts over an 18-24 month period. By the middle of March earlier this year, AMD was up over 50%+ from January 1st. Since the yearly high at $227.30, AMD is down -44%. Zooming out and looking at AMD weekly, ever since trading $227.30 AMD has put in a series of lower highs & lower lows. And I don’t see this downtrend ending soon for chips, and in fact I can see it lasting well into 2025. So where does the outflow from chips lead to? Inflows into growth, as we’ve seen with the strong performance in the second half of the year in names like IWM PLTR UPST and others. Into 2025, I expect the growth rally to continue as the strong performers enter their mark-up phase, and I think we’ll see some of those flows move into EM’s. </p><p>Look at it this way for chips & growth: AMD is down nearly -8% since Trump’s election victory, while IWM is up over 5.5%. Price does not lie, and the theme is growth over chips right now. It’s much easier to trade <em>with </em>the market vs against it.</p>
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