In this post I will be discussing the key technical risks to markets. I will not be discussing the fundamental risks of the blighted economy, mass unemployment, 27% combined stimulus, collapsed fiscal multiplier, structural deflation, record corporate debt, Fed-driven bond collapse, since those are all of the known risks this society views as a fantastic buying opportunity...
For the past three months in a row, I've written this exact same post at the end of the month as the S&P 500 tested its 50 day moving average (blue circles). Each time, the bears got rinsed and the S&P (and Dow) made a new high. Each test has marked a different position on the Nasdaq head and shoulder top: left shoulder, head, now right shoulder. Each time bulls have become more complacent and each time more bears have capitulated.
On the subject of capitulating bears, here we see that AAII (retail investor) bears are now at a one year low going back pre-pandemic. Even as the global Nasdaq implodes in the background:
This chart shows several sentiment/positioning indicators:
In the top pane, I show the monthly Ameritrade investor movement index (IMX):
"The Investor Movement Index, or the IMX, is a proprietary, behavior-based index created by TD Ameritrade designed to indicate the sentiment of individual investors’ portfolios. It measures what investors are actually doing, and how they are actually positioned in the markets."
Here we see that positioning is the most aggressive in three years - since the Trump tax cut.
In the second pane, which is updated weekly, the bulls - bears indicator peaked after the election, then it fell and now it's back to the same level, which is the highest in three years. In the lower pane of course monthly margin balances are off the charts.
Ironically, the net effect of the Biden stimulus which is targeted at the middle class is having a similar effect as the Trump tax cut - it's deflationary. It's raising interest rates and it's sucking in capital from around the world.
Here we see that in dollar terms, the European Stoxx index is rolling over at the same level as it did three years ago. And the Euro is rolling over as well:
China was the first country to go into lockdown last year, and the first country to recover. Deja vu of last year, in 2021 they are the first country to go into meltdown mode again, this year:
What is really different with this re-test of the S&P 500 50 day moving average, is that this time new lows are climbing on both the Nasdaq AND the NYSE:
Why all of this late cycle deception is a good idea is not for me to say. This society is now dominated by assholes who have gone far too long without being held accountable: The longest cycle in U.S. history and one year of sudden death overtime at a ludicrous cost of 27% of combined stimulus "GDP". Which is why now, pump and dump schemes have become the norm of investing. In the background, the margined out body count rises silently while the winners get interviewed on CNBC. The most popular pump and dump strategies even get their own ETFs, such as "BUZZ", "FOMO", and Ark Innovation.
"Ms. Wood has leaned on television interviews and YouTube videos, which racked up more than 1.5 million views, to put investors at ease throughout the volatility
Even during the recent tumult, investors put more money into most of the funds than they took out"
