Monday, August 24, 2020

This Is The Best Bear Market Rally Since 1930

Don't tell anyone, it's a secret...

It's been five months since Trump Casino bottomed on March 23rd. The same length of time the 1930s headfake rally lasted. The sheeple were just as fooled back then as they are now. Because every fool knows that stocks always outperform in a Great Depression. Historical Illiteracy 101:

It's widely believed on Wall Street that the S&P 500 is a better barometer of the overall stock market and economy than the 30 stock Dow. In addition to having greater diversification, the argument is that the market cap weighted S&P is a more accurate measure of the overall market than the price weighted Dow. For example when Apple splits, that $2 trillion dollar dumbphone bubble will no longer be the highest weighted stock in the Dow.  

That legacy belief in the accuracy of the S&P 500 is no longer valid. Due to its mega cap overweight, the S&P 500 is now extremely correlated to the Nasdaq. Which makes the old fashioned Dow a more accurate barometer of actual risk.

What it's telling us is that today's morons are buying a bear market rally with both hands, under the impression that the market is making a new "high".

When the only thing making a new high is Monetary crack addiction. 

It's clear that some people haven't been through a Tech bubble before.

Who could blame newbies for buying a Tech bubble in an economic depression?

Global Central Banksters meet at Jackson Hole Wyoming this week to coordinate additional social distanced Ponzi stimulus.

Based on the magnitude of today's Super Bubble, I suggest they deserve the rest of the summer off. There has never been a more lethal asset bubble than the one primed to explode right now. Their work is complete. 

The combination of economic risk, speculation, momentum, lack of hedging, collapsed volatility, collapsed volume and liquidity are coming together to give these central planners a good show.

Here is their handiwork in terms of over-valuation via the "Buffett Indicator" (Market cap / GDP):

This meltdown won't just signal the end of the cycle, it will signal the end of the Globalized Ponzi bailout system for the rich, as we know and love it. 

Post-meltdown and rioting we can expect that the next major bailout will be for the middle class. However, a lot of carnage will take place between now and then.

The Dow above shows that the broader market is still well short of a new all time high. However, even within the Nasdaq, a chasmic divergence is now evident.

Here we see that Momentum Tech peaked three weeks ago, as did RSI/momentum (top pane), and new Nasdaq highs, bottom pane. However, unlike the February high, the freight train kept on going, led by Apple and Tesla. 

The standard central bank/algo volatility crushing routine has done its part to levitate the market and create the obligatory false sense of complacency.

What I call Monetary Euthanasia.

When today's PhD Ponzi schemers finally acknowledge that option implied volatility is ALWAYS massively mispriced at market tops because it's priced off of recent actual volatility, they may get around to fixing their ass-backward Nobel prize winning Black-Scholes option implosion model. To factor in say for example economic meltdown, ludicrous valuations, rampant speculation, existential elections, global pandemic, so forth and so on.

In the meantime, I expect more than a few market makers will be bankrupt.

And most PhDs in Economics and Finance, as well.

It should be acknowledged that the PBOC has been doing most of the juicing of global risk assets this month.

As they did back in February.

This just in: Tim Cook's decision to split Apple stock just got Exxon removed from the Dow after 92 years:

The Dow Jones is a stock-price-weighed index. Apple's stock split, which will take the company's shares to roughly $120, from $500, would have cut the Dow's exposure to the technology sector. Monday's changes would also help the Dow "add new types of businesses that better reflect the American economy,"

Energy giant Exxon Mobil joined the Dow 92 years ago as Standard Oil of New Jersey, and it's the oldest member of the index"

Below, this IQ test for stoned zombies gives a hint as to the order of magnitude of what is coming. It appears that most gamblers already failed the test. 

Once again believing that an overthrow headfake was a new bull market. Despite being confirmed SOLELY by their own misallocation of capital.