Tuesday, June 23, 2020

Blow-Off Circus Top

Weak bears are now capitulating. This can't all explode spectacularly until they are out of the way...

Looking at the massively manipulated S&P 500 below, we can make several observations. First off, Skynet is STILL attempting to close the open gap (down) from two weeks ago post-FOMC. I don't know if the algos can make it, but they are giving it a mighty try. The casino is at the same level as it was one week ago on Tuesday. AND, if this count is correct, wave ii (of 2) is currently at the same level as wave ii of 1 from March. 

The equal weight S&P 500 gives a more accurate depiction of what is taking place in the broader market:

Here we see the VIX is three wave corrective from the post-FOMC explosion two weeks ago:

While the broader market struggles, Internet Tech powers further into outer space. The lower pane is Nasdaq new highs.

According to this article, five stocks (FAANG) now make up 40% of the Nasdaq. Throw in Microsoft, and six stocks make up a cool 50% of a 3,300 stock index. 

The COVID shutdown cemented the Idiocracy's over-riding faith in artificial intelligence. Which is now pervasive in computers and people alike. 

Outside of IT stocks, Biotech stocks are soaring as well, deja vu of 2015 just prior to smash crash:

Speaking of which, the last time we saw Chinese Tech stocks going parabolic was also in 2015. What Hugh Hendry called imagined realities. It was a great central bank funded pump and dump then, and it's an even bigger one now. 

When Chinese stocks imploded in 2015, the PBOC did everything possible to stop the crash - they banned short-selling, they halted the market for days, they injected massive amounts of liquidity - nothing worked. The Shanghai Composite imploded -60% in a few weeks.

The same thing is going to happen now to the Nasdaq.

Zooming out to a longer-term perspective, we see that the Global Dow (including U.S.), is now three wave corrective at all degrees of trend.

Which is why this crash will make the March crash look like a picnic. 

According to JP Morgan (via Zerohedge), global cross-asset correlations are at an all time high. All it took was $18 trillion in global stimulus to make idiots appear to be geniuses. 

ZH: When Risk Asset Correlations Are At Record Highs, Why Not Use Scrabble to Buy Anything?

In summary, central banks were highly successful in convincing gamblers to double down on global depression. However, they were not successful in resuscitating the economy which is now wholly dependent upon fiscal (monetized) stimulus, and hence the clowns in Congress.

Which is why the adults in the Treasury market are not impressed. Last night the clowns in the White House canceled the Chinese trade agreement and then reinstated it on Twitter a few minutes later. 

For now, all of the clowns are laughing. 

However, the impending dislocation will be of sufficient magnitude to ensure that no clowns are laughing when this circus ends.

The super dumbfuck everything bubble is terminal Idiocracy.

The overnight limit down moves and day session circuit breakers we saw in March were child's play compared to what is coming. Global market outages are coming. The Robinhood platform which was offline several times in March will soon be permanently offline. A generation of new gamblers is about to get wiped off the map.