Axis Tactics 19th November, 2025 - Stock Market Indices meet the Hindenburg

| What the Buffett Ratio is telling us | Hindenburg Warnings Flash on MAG 7 Tech Names, Nasdaq 100 Index & S&P 500 Index |

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Position Updates

We closed our profitable shorts on the FTSE 100, Euro STOXX 50 and our Long VIX futures position during yesterday’s session.

We also closed our profitable Short Bitcoin Futures (XBT-USD) position yesterday, as well.

Our Bias remains unchanged for all these instruments, however in view of the Nvidia earnings due to be released later today, the event risk exceeded the potential returns at the time. We will re-visit over the course of the day. Interested parties are welcome to make contact for further information.

The Buffett Indicator

The Buffett Indicator is a lagging ratio indicator which compares the aggregate Stock Market Value to it’s Nation’s GDP. There is debate as to which levels (high or low) constitute a meaningful signal, with >200% noted by Mr Buffett as being a level of concern in 2001 (“playing with fire”). We don’t use the Indicator in that precise fashion, instead we prefer to identify regions of over-extension or under-performance, feeding this data into our overall metrics where we combine a multitude of fundamental, technical and quantitative inputs. Previous departures from the mean trend line, by >1-2 SD, seem to have provided good entry/exit timing information (eg. Long, Short, Take Profits) when paired with our other proprietary tools.

Data from Axis IM Analytics & Bloomberg

Currently, the Indicator Ratio is looking quite stretched in relation to both the US and the Japanese Stock Markets. On the prior 2 occasions when it was similarly overextended, stock markets corrected downwards by a material amount (>25%). No slight intended towards Japanese equities per se - we simply wanted to round out our data sources for better interpretation.

Stock Market Indices meet Hindenburg

Onto a purely technical signal, to complement the valuation-based signal above. Based on the identification of ‘under-the-hood’ stock market instability, this signal doesn’t appear that often. Although nothing is infallible, previous Hindenburg signals preceded falls in overall stock market values of 25% to 60%. Notable is that a signal also appeared on the MAG 7 Index, being the Index of the 7 Top Tech Names in the US, as well as the S&P 500 Index and the Nasdaq 100 Index.

Data from Axis IM Analytics & Bloomberg

In direct opposition to these above observations runs the conviction that the markets are now completely different to prior cycles:

• AI Spending: CAPEX is a huge drain on cash but hoped to bring exponential payoffs and a structural redefinition of the Global Economy

• Vastly increased productivity from US Corporations; and

• Low Leverage across the Mega-Cap names; and

• Strong Free Cash Flow

We are in agreement with all the above. However, one should note that from April 8th to date, the Nasdaq 100 is up by over 43% and not a whole lot has changed with the “long term potential of the AI story” since then. So - perhaps there is still room for some upside - but most certainly a whole lot of room for downside. Nvidia may calm some nerves tonight, albeit temporarily - but nevertheless, Caveat Emptor.

For current & precise entry/exit levels and intra-day position updates in real-time, please reach out to your Axis IM directly.

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