Thursday, October 8, 2020

Reaching The Point Of Explosion

"It was all going so well..."

Yesterday I laid out a technical case showing a similar waterfall decline as 1929 and 1987, with the timeframe eerily the same. Yesterday and today the S&P closed above one month resistance. Squeezing bears and creating a bull trap deja vu of those two infamous prior crashes.

“You’re getting some upside follow through which is welcome for traders. [Wednesday] was the day to put risk back on. The market proved it could still have some commitment to the move that started Sept. 24,”

The hook is set.

Then today, I made the analogy to 2008 when that third wave October crash - similar in magnitude to '29/'87, created extreme volatility into the end of the year and then a slow steady decline to the early March low. What I expect to happen this time.

Now, I will discuss the short-term technical indicators, bearing in mind that the greatest risk faced by markets is a mercurial Donny Trump who is now on the war path. A desperate man will resort to desperate measures, and it's only a matter of time before he crosses the point of no return for markets. He's been doing his best to implode markets for a week. I give him an A+ for effort. 

Here I show the Trump/Biden melt-up sequences vis-a-vis Stay-at-Home Tech. As we see lower pane the broader Nasdaq peaked in early September. What I call wave '3'. It took a mere three days to erase a one month melt-up rally. Then the Biden melt-up began, which I call wave '5' aka. the end of the road. A new melt-up high confirmed by only the riskiest most overbought Tech stocks. 

As far as the cyclical/small cap end-of-cycle short-covering rally, it's important to note that the Nasdaq is four months overbought via the McClellan breadth oscillator. At the same level it was at the last time the cyclical trade exploded, in June:

With respect to gambler positioning, as we see via the equity call/put market manipulation ratio, having been duly pounded in early September, gamblers are once again ALL IN.

Move along, nothing to see here:

In summary, this gong show is living on borrowed time and money. It's overdue to explode spectacularly.

As we see vis-a-vis 2008, Republicans didn't see it coming that time either.

Of course this circle jerk is even bigger than that one. Bigger clown, bigger lies.

The dislocation in March was a picnic compared to what's coming: