Monday, January 27, 2020

VolPlosion 2.0: Endgame

With the conservative media focused solely on blowing smoke up everyone's asses to rig another election, it falls on us realists to explain how the Trump Super Bubble explodes spectacularly without any warning. As I write, the casino just gapped down due to Coronavirus, as global pandemic presents the latest buying opportunity for the MAGA Kingdom...







"JP Morgan analysts think the coronavirus fears will soon blow over and Wall Street will rush back into stocks"






First, step back for a review: The topping process began two years ago this month with the left shoulder melt-up into VolPlosion 1.0. The circumstances abiding this right shoulder melt-up are eerily reminiscent. Here are the similarities and differences:

Similar:
January melt-up: In 2018 was due to the tax cut, now due to the Fed Repo madness which reached its peak at the end of 2019

VolPlosion positioning: Similar levels of vol shorts, and similar flattening of volatility curve as spot VIX rises faster than the futures

FOMC: Fear of missing collapse. Similar level of extreme positioning and speculation ahead of a Fed meeting

Davos confab featuring money managers talking up risk in the new year

Earnings reports/stock buyback blackout window


Here is what is different:
The rest of the world is lagging, the Global Dow has not confirmed the S&P/Dow highs
In the U.S., the new Dow highs are unconfirmed by Banks, Autos, Transports, Energy, Retail, and Industrials ex-defense, small caps, average U.S. stock, and entire economy
Global growth is slowing, deflation is rising
Central banks are maxed out
Existential MAGA circle jerk featuring unprecedented lying ahead of the election



The key difference from an implosion standpoint however is that whereas in 2018, the reflation trade peaked in October, this time around it already peaked in December 2019. Which is why banks and energy stocks sat out the January rally.







Which is why we are about a week ahead on implosion versus last time. 







As I write early Monday morning post-open, gamblers are still in BTFD mode in the U.S.

However, Emerging Markets are getting annihilated






"BTFD"


No sign of capitulation means the selloff is just getting started...






Breadth worst since August, approaching a 90% down day






Momentum has officially reversed








You know you're an optimist when...