Thursday, September 24, 2020

Doubled Down. On The Bigger, Fatter, Uglier Bubble

Gamblers just doubled down on meltdown. Why? Exceptional bullshit, what else?

Let's see:
Y2K Tech wreck
Looming 2008 credit crisis
Economy imploding
Political impasse
Existential election
Sidelined Federal Reserve
IPO pump and dump

What's not to like?

King Donny announced this week that he won't guarantee a peaceful transition of power if he loses the election. He will be emperor for life. Over the past four years, Banana Republicans have wholesale abandoned all principles of democracy and now even the appearance of one.

Either way, Trump's presidency is in its waning days. If the Democrats merely maintain control of the House, his ability to do anything as president will be stymied. If the Democrats win the House and Senate he will be impeached and removed from office. Which is why he is inciting his base to civil war in five weeks. He knows that time is running out for his circus:

"Trump's intransigence, included in his latest assault on perfectly legitimate mail-in ballots on Wednesday, posed a grave threat to the democratic continuum that has underpinned nearly 250 years of republican government"

As if to imitate the ongoing political circus, the markets are in their own Twilight Zone of exceptional bullshit right now. 

This article does a very good job of describing the current level of risk: Extreme realized volatility attended by extreme complacency.  

So far...

"By one measure [# of days with 1% move or more], the Nasdaq 100 is having its second most volatile month in 18 years"  

There are other signs that speculative activity remains elevated. The largest exchange-traded fund that tracks the Nasdaq 100 Index saw its total open interest rise to 10 million contracts at the end of last week, the highest since 2007"

In other words, gamblers are loading the truck on the Nasdaq 100 at the fastest pace since the 2007 market high, during the most volatile period since the Dotcom bust.

What could go wrong?

So far this week the BTFD team has been buying every dip, amid an accelerating decline. 

Picture what happens when they actually start selling.

Skynet will explode.

For those who are wondering why this current level is so important, wonder no more:

The Nasdaq has pounded the 50 day moving average (blue line) from the top and now the bottom. What once was support, is now resistance. It's another -10% lower to the next level of support:

Today's rally was compliments of Tesla which bounced off its 50 day moving average for the second time since the early September peak. We saw this same movie back in March. When Tesla broke through the 50 day, the wheels came off the market bus.

Stay-at-home bubble leader Zoom Video posting a double top deja vu of early September:

Trump's primary election strategy is to blame China for all U.S. problems. Having made a lifetime career out of blaming everyone but himself.

It never once occurs to Donny that U.S. stocks are 100% correlated to Chinese stocks, and he needs a strong stock market for this election. Banana Republicans are about to discover the downsides of having a mentally challenged president, from birth:

Small caps deja vu:

The "safest" stocks have the clearest and most lethal wave count. 

Gamblers are leaving Trump Casino. 

Pockets empty.

In summary, we're in a bigger, fatter, uglier bubble.

And it's set to explode.