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ZERO HEDGE: Morgan Stanley Turns Bearish, Sees Tech Plunge Accelerating As Investors Dump Most QQQs In 20 Years

Article By Tyler Durden in Zero Hedge

“Fiscal Cliff +Peak Fed = Second Leg of Correction”  Morgan Stanley

Back in March, just after the Fed nationalized the bond market, Morgan Stanley’s Michael Wilson quickly emerged as the biggest cheerleader for risk assets, correctly predicting that stocks would soar on the back of the biggest surge in global fiscal and monetary stimulus which according to BofA estimates is now well over $20 trillion.

Well, the party is now over.

As Wilson writes this morning, over the past few weeks US equity markets have experienced their largest correction since the new bull market began, and according to Morgan Stanley – which still sees the bull market continuing albeit at a slower pace – not only is this “correction due to the rally simply exhausting itself into long-term resistance” but the second leg of the correction has arrived.

The MS strategist also writes that “the correction also coincided with disappointing progress on the passage of CARES 2 and a very clear message from the Fed that it does not plan to enact yield curve control as they implement average inflation targeting. The Fed followed up that messaging this past week with further disappointment for bond bulls by not providing any formal guidance on their plans for QE.”

Focusing on the catalysts behind the correction, which Wilson says began on September 2 when equity markets failed to break through formidable longer-term resistance – he says that it simply followed markets going “parabolic” for “no reason.” Well, not “no reason” – as the strategist adds, at this point “everyone understands the speculative drivers from both retail and certain institutional buyer(s) of call options [ZH: read SoftBank] in large cap technology stocks. The subsequent reversal of that speculation was naturally concentrated in those stocks too.”

Next, as Wilson studies the correction from a technical standpoint, he can’t “help but notice how the NDX is finally breaking down on a relative basis. We think the breakdown began in early July. In fact, the NDX/SPX ratio broke down in July during earnings season as investors “sold the news” on the basis of valuation and very high forward expectations.”

However, the ratio quickly regained its 50-day moving average and then made new highs in what can be described as a blow off top in August. Fast forward to today when that same ratio is now breaking down in a way that is different than the recent past: To read this article in its entirety with charts in Zero Hedge, click here

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Although the information in this commentary has been obtained from sources believed to be reliable, The Gold IRA Company does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. The Gold IRA Company will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.