The recent escape-velocity melt-up in mega-cap tech - at the expense of almost every other asset - sent relative valuations to a remarkably coincidental level. The ratio of Nasdaq 100 to Russell 2000 hit its Feb 2000 (DotCom peak) record high last week as the blowout jobs report hit...

Source: Bloomberg

We asked at the time: "Did the QQQ/RTY trade just peak?"

5 days later, we have an answer - yes, bigly!

Source: Bloomberg

As Small Caps are up 7% while Nasdaq is down 0.5%...

Today's continued Small Cap outperformance follows record call volumes in IWM yesterday...

Notably, as Goldman Sachs points out, the soft-landing narrative is once again gaining traction and so-called safe-haven flows into mega-cap tech are unwinding (as shown below Goldman's 'Soft Landing' basket is breaking out)...

Source: Bloomberg

IWM may highlight a general theme of "bargain shopping", wherein those sectors & names which have struggled, finally catch a bid.

Perhaps most ominously, the recent exuberance in Nasdaq's big names has come at a time of tightening financial conditions as 'AI trumped The Fed' - is that exuberant unwind about to assert itself?

Source: Bloomberg

Finally, adding more ammunition to this reversal, Goldman notes that CTAs are currently short R2K (the only index this cohort is short) and providing a tailwind for the market with one month baseline demand estimates the largest in two years.