Thursday, February 27, 2020

Super Crash In Broad Daylight

The noose has been getting tighter every day this week...

Now we are seeing the full consequences of a political party whose only mission is to be lied to constantly. Told that they are great again. Told they are exceptional. Told that everything is going A-OK, even when it's not. Denialist zombies who would rather listen to the soothing words of a known sociopathic liar, than to experience any form of God given reality. The Mickey Mouse Club loves Disney World. Even at this late juncture, as his lies implode in broad daylight, they STILL buy all of his bullshit with both hands with every dime they've got. 

What we are witnessing is super crash in real-time. The most violent reversal of fortune since the Great Depression:

As I write mid-day Thursday, so far, this has been a slow-motion meltdown. No sign of panic much less capitulation. Hedge funds are monetizing their last hedges, while retail gamblers are buying every dip. Which is setting up the moment when the casino goes bidless. 

The market is dripping lower in a controlled fashion as the noose gets tighter and tighter. Two 90% down days this week so far, and today is on track to be another one. The market is technically oversold based on breadth (NYSE McClellan oscillator), but not at an extreme level yet.

The low volatility "safe havens" tell the story, below:

When the 50 day moving average (blue line) broke, the Volatility index (VIX) spiked back to December 2019 levels this morning. However, as we see, back in December, the low vol index was well through BOTH the 50 day and 200 day (red line).

I think we all see where I'm going with this - (implied) volatility has been seeping higher, but it has not exploded. 


However, realized volatility is exploding as the machines lose control over the casino:

The pattern this week has been the same EVERY day - buying the dip every morning, followed by weak closes in the afternoon. Bear market action.

Here we see via the S&P 500 ETF, that Monday gapped down through the 50 day, then churned below the line, taking another big leg down on Tuesday. Wednesday (yesterday) was a sideways roller coaster ride. Today, deja vu of Monday, the S&P gapped through the 200 day and is now churning below the line.

I think we all see where I'm going with this as well.

Which is where this all gets interesting. Because recently I made note of the fact that the weekly opex has been very weak, particularly amid this period of record call option speculation. Specifically, Thursday close through Monday open have been very weak for the S&P futures.

This past week starting last Thursday, we saw this again in spades. Which means that coming up on this week's opex tomorrow, one would have to be somewhat of an optimist to believe this couldn't get ugly between now and Monday.

Outside of stocks, it's a bloodbath, as Treasury bond yields keep reaching new all time lows, indicating an imploding economy. 

Lying time is over. Now the bill is due for the most asinine lies every bought and sold. 

And it's going to get fugly