Gianni Di Poce is shorting Japanese yen futures right now. He reads the dollar’s strength against the yen as a sign the worst of this tech selloff is close to finished.
The press keeps blaming the election for this volatility. Gianni points to the carry trade instead.
He’s watched this play out twice already. The carry trade wobbled in the summer of 2024 and again going into Liberation Day. Tech took a beating both times.
Here’s how it works. Money managers and tech companies borrow in yen to buy tech shares. A weaker yen makes that debt cheaper to repay with a stronger home currency.
That’s why Gianni calls the tech selloff overdone. He still expects more downside before the final low prints.
Monday’s rally didn’t change his view. Gianni reads it as short covering.
Bears chased stocks lower last week. They piled into puts going into the weekend.
The market had to pinch those put buyers. Gianni believes a lot of them got covered on Monday.
Bearish trends are notorious for producing some of the most powerful rallies. Short sellers buying back their positions fuel those moves.
The trend itself has turned. Stocks took out the low from the end of July and printed a couple of lower highs over the last month.
Gianni calls this a corrective downtrend. He doesn’t expect stocks to collapse 30% to 50% over the next 6 to 12 months.
Gianni measures corrections through time and price. This is the third double digit correction in the Nasdaq this year, and it’s the steepest.
The March correction ran almost 6 months with a shallower decline. This one cut deeper in less time.
Gianni takes that as a sign we’re closer to the end of this pullback than the beginning.
In tonight’s video, Gianni maps out where he’s hunting for a low and how he’s positioned:
- Gianni wouldn’t mind seeing the S&P 500 stretch to the 7,150 to 7,250 zone. He’s watching 25,300 to 25,800 as the zone to start looking for a low in the Nasdaq.
- The Nasdaq 100 is back to valuations last seen at the 2022 bear market bottom. Gianni says semiconductors trade cheaper than consumer staples and healthcare.
- The Nasdaq fell around 5% last week while the Chinese market climbed around 5%. The Swiss market hit a new all time high as money reshuffled around the world.
- Gianni is carrying a lot of cash and keeping his positions small. The trade desk also looked at a long setup in Ovintiv (OVV) as crude oil builds toward an important bottom.
The timing matters most. A low by the end of November or early December would set up a powerful rally in the first half of 2027.
Gianni calls this the false move before the slingshot. Seasonality turns favorable once the midterms are behind us.
He also flagged one risk worth tracking. In 2000, the Nasdaq and S&P 500 peaked around March while the equal weight S&P 500 kept rallying for another year.
The Mag 7 could fail to recover next year. The average stock could still climb while the indices suffer.
