To successfully navigate these Disney markets we will have to think like an idiot without becoming one. Beware the Stockholm Syndrome. When today's two main investing strategies - dumpster diving and Ponzi scheming both implode at the same time, that is when you get the "big moves" as we saw in March.
In the meantime, just remember one thing - economic meltdown is a hoax. Party on Garth. Party on Wayne.
This COVID shutdown is merely the worst idea coming at the end of decades' worth of ever-worse ideas. An old age home painted into the corner by a life time of bad decisions choosing wealth over health until they had a near death experience and shit a brick. Trump will forever regret his decision to shutdown the U.S. economy. After all, it was merely another indulgent executive order to delight his decrepit Twitter mob. It was a kneejerk reaction that he regretted immediately. And one that will forever be seen as the death knell for American Ponzi capitalism. Too late. Nature pulled a punch and the Idiocracy blinked. I don't care what CNN says, if they had the slightest clue that their Amazon-indulged virtual way of life is already over, they would be panicking right now too. Those on the alt-right warning of economic meltdown are not wrong, they just have ZERO credibility. Too many fake conspiracy theories has rendered this impending meltdown just another hoax to be ignored as the "system" collapses in real-time. For their part, today's EconoDunces, years hence can brag that paying people to borrow money (negative interest rates) was the best idea they had at the time, having systematically exhausted every other dumbfuck idea. First they consigned the developing world to poverty and then they failed the entire developed world as well.
Getting back to Trump Casino, as I've said many times before, insanity is the "new normal". The Great Depression saw 10 bear market rallies - on average one per year. Each time, gamblers believed it was the light at the end of the tunnel, when it was really a freight train screaming towards them. This however, is the most denialistic rally in human history. Not only is the virus still en fuego, but the economy is nowhere near rock bottom. Meanwhile momentum junk is making new highs.
I've also said many times that the stock market exists solely for insider share dumping and IPO moonshots, - which happens to be insider share dumping as well. This past week, the crap-laden IPO index made a new all time high, as the virtual economy bubble went manic. And, what to do but start launching new IPOs again. Yes, you read that right, Wall Street launched a new IPO, and it was a moonshoot at that:
"Inari Medical posted pricing terms on May 18th for its IPO: 7.3 million shares at $14 to $16 each...The deal was [final] priced after the close on Thursday: 8.2 million shares at $19 each. That’s right. Bankers upsized the deal and priced it above the high end of its new price range. The IPO started trading Friday at $41.30 and closed at $42.51, up 123.7 percent from its IPO price."
To be more accurate, the stock closed 200% above the original $14 term sheet price.
Here we see the overall IPO index as of mid-day Monday. Making a key reversal of fortune on the daily:
As I was saying, each rally will look more specious than the last which means that bearish sentiment will rise over time from today's still-denialistic levels. However, central banks will do their best to ensure that valuations remain fully disconnected from reality. Which means that the market will remain uninvestable from a long-term perspective. In the meantime, the bearish consensus will grow and the bear market rallies will become more brutal with each leg lower. Something we have to expect going forward. When we ride the rallies higher, we have to make sure they reach full glue sniffing mode before we bail. Otherwise we will get out far too early. On the downside, when the neighbours are bearish, then it's time to rent stocks again. Rinse and repeat.
It appears as of Monday, that we are watching a major capitulation rally as weak handed bears got mowed down with a 600 Dow point open after the long weekend. However, the Nasdaq is starting to roll over.
Which means that the 1930 trade war rally is reaching its apex.
Zooming out on the S&P 500 we see a very familiar pattern emerging. A bear rinse at the 200 day and then re-test of the two month low.
The rest of the world took the Memorial Day holiday as a chance to catch up with U.S. delusion. Kindly delaying overnight risk until U.S. stay-at-home gamblers were back on line. So they could watch their self-implosion in real-time.
The people using this app and most people in general get their investment ideas from chat rooms and other like-minded neophytes. Essentially, it's a circle jerk of like-minded dunces, not unlike MAGA itself.
Of all the bellwether stocks I track on my most bearish list, Ford happens to be at the top of the list. Because it's tracing out a three wave correction at the EXACT same level as post-Lehman. Which means that a lot of people on Robinhood are about to explode:
In summary, the market is a value trap. Meaning that there is no value in this market and therefore bottom fishing collapsing sectors amid rampant denialistic bullshit is a great way to self-implode. What is keeping this economy from rebounding any time soon is lingering COVID fear, social distancing, and a byzantine clusterfuck of re-opening by-laws and rules that vary from locality to locality. Ironically the much heralded vaccine won't help much because the faster it's developed, the less it will be trusted. The "anti-vax" movement is about to go mainstream. Geezers are between a rock and a hard place, and young people are already breaking the rules, still not sure why they were in forced celibacy mode in the first place. Clearly a conspiracy of parents.
All of which is why from a casino standpoint, the only asset class left is "Momentum" - which operates per the greater theory of investing: Everyone expecting a greater fool to come along, until they inevitably realize the greatest fool is the one in the mirror.
When these two strategies - dumpster diving and Ponzi scheming - both implode at the same time, that is when you get the BIG index moves to the downside. As we saw in March and as we will see again now.
Gamble at your own risk.