May 2025

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May 12, 2025

Tech Letter

Mad Hedge Technology Letter
May 12, 2025
Fiat Lux

Featured Trade:

(THE FIGHT FOR AI SUPREMACY)
($COMPQ), (AMZN)

The Fight For AI Supremacy

Uncategorized

According to the betting markets, the odds of a recession

Overnight, have tanked from over 80% to just a fraction under 40%.

It is interesting to see such a development and speaks volumes to how volatile the tech markets are right now.

The V-shaped price action by the Nasdaq index ($COMPQ) perhaps forced the hand of decision makers.

Here we stand, only 6% from all-time highs after a vicious reversal to the upside.

I think it is fair to say that the belief in tech stocks has not corroded and is just resting.

Even though what was agreed was just a 90-day pause, the biggest takeaway is that the Americans aren’t willing to just blow the world order up.

The Chinese won’t just be moved to the side and switched in for Indians like a 6^th man coming off the bench.

In fact, this signals that China has a big role to play in the upward trajectory of tech stocks, and that is why the tech index has exploded to the upside this morning.

Some of the tape is mind-boggling.

At the time of this writing, Amazon (AMZN) is up 8% and the Nasdaq is up over 4% in just ONE DAY.

To say this is a victory for tech is an understatement as the world’s two biggest economies unwound for now most of the tariffs they had imposed on each other since April in a tit-for-tat battle that was threatening to stoke U.S. inflation, crash China’s export engine, and upend the global economy.

The U.S. agreed to lower the base level of tariffs on most Chinese goods to 30%, from 145%, while China said it would cut its levies on U.S. products to 10% from 125%.

The U.S. tariff on many Chinese products will be higher than 30%. U.S. duties on steel, aluminum, and autos remain in place, as do some earlier tariffs on certain Chinese goods imposed during President Trump’s first term in office and that of former President Joe Biden.

Washington and Beijing agreed to keep the new tariff levels in place for 90 days, with the goal of working toward a broader deal on trade in further talks.

For China, an unrestrained trade clash with the U.S. would threaten millions of jobs tied to serving U.S. consumers and potentially worsen trade tensions with other countries wary of a surge in Chinese imports. China was also worried about losing access to some U.S. products it still needs, such as Boeing planes, aircraft parts, and certain chips.

In the short-term, I believe we are ready for a short squeeze higher.

The market was taken by surprise by the sudden announcement, and many companies were bracing for another onslaught of negative news.

In the next 60 to 90 days, I can easily see the US dollar popping higher, tech firms reforecasting higher revenue targets, and the Nasdaq coalescing around the positive energy to surge higher.

That’s not to say that everything is hunky and dory, we are literally just one tweet away for the market collapsing and going into a tailspin.

The risk levels have never been higher, and I would urge readers to keep positions small.

May 12, 2025

Jacque's Post

(CHINA AND THE U.S. AGREE TO A TRADE DEAL IN SWITZERLAND)

May 12, 2025

Hello everyone

WEEK AHEAD CALENDAR

MONDAY, MAY 12

8:30 a.m. Australia Consumer Confidence

Previous: -6%

Forecast: 2%

TUESDAY, MAY 13

6:00 a.m. NFIB Small Business survey (April)

8:30 a.m. CPI (April)

WEDNESDAY, MAY 14

9:30 p.m. Australia Unemployment Rate

Previous: 4.1%

Forecast: 4.1%

THURSDAY, MAY 15

8:30 a.m. Initial jobless claims (week ended May 10)

8:30 a.m. Retail sales (April)

8:30 a.m. PPI (April)

8:30 a.m. Empire State mfg index (May)

8:30 a.m. Philadelphia Fed mfg index (May)

9:15 a.m. Industrial production (April)

10:00 a.m. Business inventories (March)

10:00 a.m. NAHB survey (May)

FRIDAY, MAY 16

8:30 a.m. Housing starts (April)

8:30 a.m. Import prices (April)

The U.S. & China meeting in Switzerland: will it deliver?

The news has just come through…

U.S. and China have agreed to slash tariffs for 90 days in a major tariff breakthrough. Reciprocal tariffs will be cut from 125% to 10%. Both the U.S. and China said they will continue discussions on economic and trade policy. What is in doubt is whether the 90-day pause is enough time for the two sides to reach a detailed agreement. But at least we have some movement on negotiation. Dow futures have jumped 1000 points, gold has fallen, and the U.S. dollar has surged.

In other news…

The health of the consumer will be clearly visible this Thursday when we see retail sales data and the producer price index report. We will also see the CPI report which will tell us how the trade conflict has affected inflation.

The S&P 500 has already rallied more than 13% from its April 8 lows, so the market may need a positive surprise on the trade front to take another big jump.

I tend to believe the limited ranges we have been seeing have been in anticipation of some de-escalation out of China, and as such, when the actual news comes out, the market reaction might be rather ho-hum and could even mark a tactical top, regardless of what the news is.

This level in the market could be a good time to re-establish short positions or add to them if you have them already.

They don’t make things like they used to…

White goods, toys, heaters, whatever you can think of – most of these things don’t have a long life.

Some products don’t even outlast the warranty period before they break down and stop working, or need a part replaced, which is not even worth the cost.

Consider the cost of getting someone to your house to replace the part and the cost of the part. It’s often not worth it.

I remember growing up with a Kelvinator refrigerator, which lasted around 30-40 years. Can you imagine anything lasting that long today?

Today, companies make products that are designed to break down, so the consumer must go back and buy another one.

Forty and fifty years ago, we didn’t have the technology we have today, so why, with all the technology we have now, is it so difficult to make quality products?

I’m not saying all products are poorly made, but you must admit that the quality overall is not evident.

It seems companies making money trumps making quality – so disappointing.

MARKET UPDATE

S&P500

The index is up 13% since the April lows at 4835. No confirmation that we have seen a top yet, although upside momentum is slowing and suggests further gains would likely be limited, as the potential of a peak for at least a few weeks/months is rising. So far, we have had a high of S&P 500 5832 in the futures.

Support: 5575/85, 5475/85

Resistance: 5760/85 area/5830

GOLD

Bearish technical data is visible in the gold chart (sell mode on the MACD) & and an overbought pattern. However, we could still see more ranging/consolidation before gold completely rolls over.

Support: $3268/73 & $3197 & $3075

Resistance: $3353 & $3438/43

BITCOIN

We’ve seen Bitcoin move sharply higher – the long-term view remains in focus with a target between $125k and $150k. The market is getting overbought with such a sharp move, so some consolidation might be in front of us before further moves to the upside.

Support: $99.90/$100.4k & $96.0/$96.4k

Resistance: $104.4k

HISTORY CORNER

On May 12

QI CORNER

U.S. officials met with Chinese counterparts in Switzerland this past weekend to address the trade war between the world’s two biggest economies. This chart from Spencer Hakimian, founder of Tolou Capital Management, shows why a ratcheting back of rhetoric, at the very least, should be expected.

Ernst Imfeld (Family Office)

SOMETHING TO THINK ABOUT

Cheers

Jacquie