The $NDX keeps moving from new highs to new highs driven by a narrow group of stocks. Nothing new about that as this trend has been ongoing for some time and headlines of new record prices for such stocks such as $FB, $AMZN, $GOOGL, $MSFT are now a daily occurrence. The untouchables. Jeff Bezos is worth $140B, no that was so last week, now he’s worth $150B.

How do you quantify risk in a market that prices in no risk?

While most people are focused on stocks prices one underlying issue that appears to be largely ignored by participants is the unprecedented market capitalization expansion we are witnessing in these few select stocks.

The numbers are simply staggering. Magic money out of thin air.

$FB, $GOOGL, $AMZN, $MSFT and $AAPL. These 5 stocks now worth nearly $4.1 trillion. That makes these 5 companies the 4th largest economy of the world if you use GDP as a reference. Not bad for less than a million people employed at these 5 companies.

Now check this out: Their combined market cap increase? $260,000,000,000. That’s $260B. In just the past ELEVEN trading DAYS!

No seriously:

Oh it gets better.

2018 year to date? EIGHT HUNDRED TWELVE BILLION DOLLARS market cap expansion in just 6.5 months. $812,000,000,000. That’s a company the size of a $MSFT or $GOOGL in its own right.

Commodities, including gold and silver, have plunged to become so deeply oversold that a snapback rally looks likely soon, that could be sharp as if they turn up here it will trigger a wave of short covering. Such a rally is likely to be sparked by a dollar reaction, as we will see, but it is likely to be followed by further heavy losses across the sector if a general market crash ensues as expected. 

We will start by looking at the latest dollar index chart, as a dollar reaction here will be what ignites a commodity rally. The 2-year chart for the dollar index shows that the dollar is rounding over beneath a zone of resistance that dates back to a reversal that occurred at this level last October and November. The pattern that has formed from last July looks like a large Head-and-Shoulders bottom with the Right Shoulder of the pattern about to form. If this is what it is, it implies that the dollar will in due course go considerably higher to the 102 – 104 area, which we can expect to happen during the market crash phase, but first there is the little matter of the Right Shoulder forming to balance the pattern, and if a more or less symmetrical Right Shoulder forms then we are looking at the dollar dropping to the 91 – 92 zone over the near-term, which will be sufficient to generate a significant snapback rally in commodities, that, as mentioned above, is likely to be magnified by short covering. That is the theory that I have and which is mine and what it is too. 

So now let’s proceed to review the charts of a range of important commodities – copper, gold, silver, and platinum and their respective COT charts, which will give us more of an idea regarding how likely it is that they will soon rally. 1-year charts are selected to enable us to relate them directly to the COT charts which are also for 1-year. Starting with gold we see that it has accelerated into a deeply oversold state on its MACD indicator and relative to its moving averages, with the drop from its April peak clipping $150 off its price at its April peak. Clearly gold didn’t take kindly to the dollar’s latest rally. Gold’s accumulation line has held up well, however, which increases the chances of a snapback rally imminently, which will be augmented by sudden short covering as mentioned above.