The definition of a clusterfuck is when half the country refuses to get vaccinated and refuses to wear a mask. While the other half of the country is vaccinated and refuses to stop wearing a mask. The one thing they all have in common is that they will be shocked when this half assed "recovery" explodes...
Any questions?
What if by any chance a market crash is not good news. This is the question I will attempt to answer.
This week, all of the inflation trades are starting to implode due to inflation. You can't make this shit up. All of the speculative commodity inflation finally showed up in the lagged CPI and what happens, the speculative commodity trade explodes.
This is where it gets interesting: The last time lumber spiked to this level of overbought was late last summer, which coincided with a top in the S&P 500, Nasdaq, and global Dow. That marked the end of the pre-election rally which lasted five months. The post-election rally began early November and ran through April which is six months. May has been a little choppy for global markets so far. Keep this September turning point in mind, because I will be discussing it further below:
Writing after Thursday close, Transports are down -1.5% on the week - their first down week following a record 14 up weeks in a row. In other words, deja vu of 2010, the May curse MAY be striking again.
Switching to Tech stonks, they too are having a rough week. Yesterday, Elon Musk founder of the largest EV company in the world said that Tesla will no longer receive payment in Bitcoin, because he just learned that it's not eco-friendly. In other words, the guy who has been cheerleading crypto currencies these past several months just dropped them like a rock. And his stock got dropped like a rock as well.
In addition, Jim Cramer told his fan base that the Tech trade is dead now that the CDC is saying masks don't need to be used indoors for people who are vaccinated. Apparently no one in my area got the memo because they're all vaccinated and yet they seem to enjoy operating incognito.
All of these factors have combined to make the Ark ETFs bidless on what will likely be record weekly volume, depending upon tomorrow's action. You will also notice that the % of Nasdaq above the 50 dma is right at the September level, so we know what the bulls would say - this is September deja vu and a rally is imminent. Except we see in the upper pane, that this is nothing like September. Back then, Tech stocks had been rallying for five months and suffered two weeks of correction. In this timeframe, the lockdown stonks have suffered nine down weeks in the past three months on MASSIVE volume.
So let's take a look at Nasdaq volume momentum. It's significantly below the September lows:
Turning to sentiment, we notice that weekly AAII bears are still in hibernation.
On the other hand, active manager positioning is at the lowest level of 2021. They got rinsed by the fake new Nasdaq high but now they're back to RISK OFF.
In summary, the market is oversold, especially the Nasdaq, which is why we could see more one day robo rallies such as today. However, my assertion that this is the beginning of the end-of-cycle crash remains my base case scenario.
The largest one year rally to an all time high is running on glue fumes and the probability that it continues is:
"Never happened before"
Those who say that I should use a log scale chart, don't understand that the percentages (lower pane) won't change.
