All major crashes in the past several decades were due to excess stimulus and rampant speculation. This super crash will make the others pale by comparison. The current melt-up is capping off a decade of global Japanification in which central banks, at the behest of an aging society, cultivated an unquestioned belief in the virtual simulation of prosperity and its acolyte QE. The inevitable result of protecting gamblers from risk...
The cause of the 1987 crash was the Reagan tax cut which fueled excessive speculation. The cause of the Dotcom crash was easy Fed policy and excessive speculation. Smash crash 2010 occurred during the post-2009 melt-up amid record global monetary stimulus. The cause of the VolPlosion in February 2018 was Trump's tax cut and excessive speculation, which exploded the exact week the tax cut came into effect. The cause of this super crash will be due to the monetization of the Trump deficit at record stimulus, global central bank decade-high stimulus, China stimulus to offset Coronavirus, and of course excessive speculation. Which has now reached manic levels:
What happens to the Nasdaq when these most active stocks by dollar volume all implode at the same time?
System meltdown, that's what. Overnight futures limit down, mass margin calls, flash crashes, brokers offline, panic and so forth. We've never seen this much risk concentrated in so few stocks at the same time:
All of these most actives are on the list of stocks that have driven record options volume:
Here Are The 15 Stocks That Have Driven Record Options Volume
The (options) tail is now wagging the dog:
Before we get to Tesla, a new bubble just formed. Appropriately, it's a space stock now in outer orbit on 10x average volume:
"Fidelity told CNBC that Virgin Galactic was bought more than any other stock on Tuesday — topping Apple, Tesla and others"
Getting back to Tesla which is leading the overall bubble in clean energy. Recall, 2020 is the year of Big Oil divestment. As we see, this manic run began when all U.S. brokers cut casino commissions to zero:
"Free gambling"
Clean Energy ETFs are in vertical ascent on heavy volume
Within the Semiconductor space, despite the supply china disruptions in China, AMD is making new highs.
This stock has doubled since November:
The last time Nvidia imploded back through its 200 day, the S&P lost -20%:
Momo Tech has entered outer orbit
This week is monthly opex which means that a record number of lottery tickets will expire COB Friday...
Position accordingly
We can see via the hedge fund holdings that the top performing stocks are losing relative momentum (RSI, top pane)
"Low volatility" safe havens are likewise overbought
Nasdaq divergences are similar to last May
NYSE divergence similar to VolPlosion
The stock bond ratio is warning that this is a headfake rally, based solely upon momentum junk stocks:
This is what they are told to believe:
