This cycle will end the exact same way it started, with broke Millennials protesting Wall Street corruption. This time however, there will be no rich assholes laughing at them, because their last bailout is in the rear view mirror...
As the market approached the February high I said there were more red flags than a Chinese parade. Since the Nasdaq crashed and burned and was resurrected, the red flag parade has become far larger:
The market is now a giant casino. Everyone is now playing against everyone else. It's clear that today's gamblers enjoy looking around the Blackjack table at all the people they hope to plunder in a zero sum game. Today CNBC and Marketwatch were lauding a crypto called "Dogecoin". It was started as a joke on the crypto market, but then it garnered the attention of billionaires Mark Cuban and Elon Musk so now it has zoomed from four cents to forty cents over the past few weeks "minting overnight millionaires". What they forgot to mention is that these millionaires are benefiting at the expense of those coming in at the end of the pump and dump. The many are minting the wealth of the few. Sound familiar? It's the S&P 500 in crypto form. Somehow a forty cent pump and dump scheme is now front page news.
As I pointed out yesterday, the Nasdaq has now round tripped back to the February opex high. Both stimulus rallies lasted the same amount of time - six weeks. The Nasdaq has now filled all of the open gaps from its breakdown in February. Now all of the open gaps are below the market and the options manipulation "stimulus" is set to expire.
Revisiting the red flags that were evident in February, we notice that risks have only grown exponentially in the meantime.
First of all, the SPAC bubble (not shown) with respect to listings has doubled in magnitude over the past two months, even though many deals are now failing and many SPACs are trading below net asset value.
Next, from a positioning standpoint, the Rydex ratio peaked in February and it's making an even higher peak this month:
Active Managers were extremely bullish in February, then they got extremely bearish and now they've round-tripped back to la la land. In addition to gamblers going ALL IN at the end of the cycle, this robo rally has been fueled by bears capitulating en masse:
The crypto market was at $1.4 trillion in market cap in February and now it's at over $2 trillion. So that Ponzi scheme grew much larger. As a measure of social mood we can see that Dogecoin fever peaked in February as well, however that % gain was TWICE as large as this recent rally:
Those are the similarities to February - all indicating that risks have grown in the meantime. Here are the major differences:
First off, most Tech stonks did not join this latest round trip to all time highs on the Nasdaq. Here we see the ultra popular Ark ETF is obeying the opex rollover signal:
Unlike the Nasdaq, the NYSE keeps making new highs, but it too is highly manipulated by the monthly options cycle. New lows keep expanding with every passing opex and are correlated to Nasdaq new lows:
Here we see options expiration relative to the S&P 500. As we see, new lows on the NYSE and Nasdaq are becoming more sensitive to declines in the S&P 500:
