Four Hindenburg Omens on the NYSE and two on the Nasdaq in the past two weeks:
Many people forget that stocks rallied after the Lehman event. Why? Because the Fed shit a brick and came in with massive liquidity. This sparked a MASSIVE short-covering rally. Sound familiar?
Once the shorts had covered, the casino fell like a brick.
Good times.
The events at this juncture are eerily familiar. A ludicrous amount of risk, global dominoes falling, and yet a last minute surge into the riskiest stocks. Speculators unwilling to leave the casino. Unwilling to admit the party is over.
And it's been one hell of a party, featuring a blowoff top in momentum stocks driven by fear of missing out. For their part, fund managers are chasing the averages into melt-up. After all, it's not their money, it's "OPM".
Other People's Money.
Hedge funds have converged on the most overbought large cap stock in the market. As it was twenty years ago at the height of the last Tech bubble:
"Two decades after it first peaked as the dominant leader of a dazzling bull market, Microsoft is once again Wall Street’s indispensable stock."
In the past 12 months, Microsoft has added $600 billion in market capitalization — equivalent to the company’s peak value in high-tech heyday of the late 1990s."
Microsoft is now the very top holding in its Hedge Fund VIP basket"
Hedge funds are the new dumb money:
Just as this past Monday's pandemic gap down was a bear trap, this last stage of the rally is a bull trap: The running of the stops set above the prior high, reached when the pandemic hit two weeks ago. A headfake new all time high, compliments of weak bears evincing the conviction of a five year old in a candy store.
Last week I ran down the pantheon of prior historical market crashes. The best known ones were stair steps lower over a period of weeks culminating in a crash. 1929, 1987 etc. I have often surmised that this Disney market would be the first one in history to crash directly from all time highs, with ZERO prior notice. Aside from a decade of denial.
That prediction is coming more true by the minute, as more and more money crowds into fewer and fewer massively overbought Tech stocks:
The pandemic contagion is spreading globally both from an illness standpoint and from an economic standpoint. This week, the locus of implosion - China - shot their wad propping up global risk markets. Aided and abetted by short-covering and Tesla gamblers. Nevertheless, Emerging Markets are rolling over, the same way they did last week at this time, and the week before:
You know you're an optimist when:
Institutions were hitting the PBOC bid all this week, which is why this rally is now running on Tesla glue fumes heading into the end of the week.
The last time we saw this, the S&P was down -20% in the fourth quarter of 2018:
All of which means that come early next week, gamblers are going to need a much bigger bazooka.
Or shit gets biblical.
At "all time highs"
