Thursday, December 19, 2019

Trapped In Trump Casino

One year ago, it appeared to be the end of the cycle, fearful gamblers were fleeing Trump Casino. Trump rescued the markets with his call to "BTFD" on Christmas Day. That ignited a stimulus-driven Super Tech bubble, unconfirmed by the rest of the market and the economy. One year later, manic greed is as stoked as fear was a year ago. Now that his true believers are locked in Trump Casino, the Tech bubble will explode...

Fake trade deals, presidential impeachment, record stimulus, non-functioning repo market, end-of-cycle melt-up rally, Central banks maxed out, cycle low global growth, extreme over-valuation, Y2K-level concentration. Extreme complacency. 

Recession ex-deficit
Bear market ex-Tech

What's not to like?

In hindsight, the record will show that the true bull market ended in 2018. 2019 was a very narrow Tech bubble fueled by record combined fiscal and monetary stimulus. The vast majority of stocks and sectors, including the rest of the world, peaked in 2018.

In other words, this is a stealth bear market

Jesse Felder noted yesterday that Rydex bullish asset positioning is near decade highs:

What we notice from the Rydex asset ratio is that not only is it approaching prior highs, but it's also three wave corrective in 2019:

Aside from Info Tech, most sectors are three wave corrective.

Including Biotech:

I bring up Biotech because the top performing stocks right now are Biotechs

Also among today's highs:

The other top performing stocks are semiconductors, some of which are at new all time highs, however most of which are also three wave corrective

In other words, social mood is heading for third wave down panic attack

Overlaying the Rydex ratio with the Hindenburg Omens, also confirms the head and shoulders pattern

The stealth bear market is about to come out of hiding with a vengeance

"Market timers are as extreme optimistic today as they were pessimistic one year ago at the bottom"

What we are witnessing is a one year round trip. Except wave 3 down will do in days what wave 2 took a year to accomplish. 

And that will be just the start of it...

Years ago, pundits predicted that as the Boomers retired, they would dump stocks and crash the market:

We're about to find out

Crash bets are at the highest level of 2019: