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Anytime there’s a parabolic move and lasting enthusiasm in the market, the supply comes to cool things down. The supply comes in the form of IPOs, secondary offering and debt raises. SpaceX is raising $75 Billion; Anthropic – $65 Billion. OpenAI is likely a few weeks from announcing its IPO. Google just had an $85 Billion secondary offering. Amazon will probably also raise money in order to keep paying for its AI infrastructure spending. Of course, the supply will matter at some point, and it could lead to a pullback that is faster and deeper than most expect. We saw it on June 5th, when the Nasdaq 100 (QQQ) dropped almost 5% on more than 2x its average traded volume. Semiconductors ETF, SMH, declined 9% on the biggest volume since its last base. It is normal to see market leaders like MU, MRVL, DELL, INTC, ARM, AMD, SNDK, and others pull back and test their 20 or 50-day moving average. It is a different question, for most of them, such a pullback would mean a 20% to 40% correction.
The April jobs report came much stronger than expected, while March was revised higher. In the meantime, the latest inflation readings came much higher than the Fed’s target. In theory, this means more hikes ahead, which would shake the confidence in this bull market. In practice, I don’t think many of the Fed members will dare to raise rates, but the potential for it could keep the market on edge.
This bull market is not likely to be over. We might see a deeper-than-expected pullback that will scare people out of their positions. This is normal market behavior. The best thing that could happen for the sustainability of an uptrend is a multi-day pullback. It would create much better setups and entry points. I am excited about the possibility of it.
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