SAMT Blog
The Perils of "Painting the Tape"
28. June 2023, by Ron William
Technical Analysis
Sound the alarm! The recent escape-velocity melt-up in mega-cap tech, is likely to suffer the perils of painting the tape,’ based on historic divergences in market internals, greater than Y2K TMT and 2008 GFC. Jesse Livermore, a famous trader of the early 20th century and publisher of the classic trading bible, ‘Reminiscences of a Stock Operator’, was known for taking advantage of a previous version of this market anomaly. Generations later, the term evolved to describe artificial and unsustainable market rises that would typically carry large asymmetric risk. However, as many astute professionals know, this is only a market setup, and not a timing signal.
What has changed is the intersection of technical, macro, and political factors. Technically, several key ratios are now at a critical tipping point. One headline example is the growth/value ratio of Nasdaq 100 to Russell 2000, recently hitting its Y2K TMT record bubble peak (Fig 1). Currently, the ratio is unwinding sharply lower, with small cap marginal outperformance, fuelled by record call volumes in IWM (Figure 2).
Goldman Sachs points to changing macro sentiment, as the soft-landing narr...
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