There have been four Hindenburg Omens in the past two months. Three in March, one last Thursday and very likely one today although we won't know until tomorrow. I said there were three so far on Twitter, but it's actually four. This pattern is very similar to last year where there was an early cluster and then a late cluster right before the wheels came off the bus. The Hindenburg Omen means there are a significant (>100) number of new daily highs and lows at the same time indicating pockets of speculation in a disintegrating market. Many pundits are dismissive of the Hindenburg Omen. The assholes who dismissed it last year were quickly entreated to a -35% shellacking. But this time will be a ground and pound they will never forget. What they deserve for being pump and dump pimps who never learn their lesson.
The question on the table: is this third wave down for Tech/Momentum stonks? Because if it is, then it's about to get interesting.
Step back for some economic perspective:
This is the headline that facilitated the Dow's new all time high Monday morning:
It should be abundantly clear to everyone that Fed policy is only lubricating markets and doing nothing for the actual economy. How today's gamblers arrive at a conclusion of inflation when the job market is no longer functioning is a tale of greed over logic. The $300 /week Federal unemployment stipend is at the core of the delusion. It's the equivalent of $7 per hour. Granted, it's enough to disincentivize a low wage worker from returning to McDonald's, but for anyone who makes the median wage, it's a pay cut when combined with the state UI benefit. In other words, contrary to popular belief there won't be any hyperinflation coming from a $300 per week unemployment stipend.
Due to these record monetary distortions it appears that bond yields are now becoming inversely correlated to the economy which is something we've never seen before. Since the jobs report was released on Friday, the bond market has been selling off whereas normally it would be rallying. We can infer this means that the bond market fears this narrative of "inflation" as well - inflation that is now inversely correlated to the economy. Today's pundits will say this points to "stagflation" similar to the 1970s. However, back in that era, capacity utilization and employment were at all time highs. Now, they are at all time lows. What it all points to is an over-sensitivity to minor price movements in the economy, which is causing outsized moves in asset markets. Where even the whiff of price increase sends the cyclicals soaring far beyond what the underlying fundamentals would suggest. Led of course by the commodity sector.
In other words, the Fed sees a weak economy, so they are hell bent on increasing stimulus. Speculators see the massive stimulus and assume it's having a massive effect on the economy so they bid up asset prices far beyond reasonable valuations. In the meantime, the real economy is languishing due to all of the various re-opening bottlenecks that are preventing full recovery.
So no surprise as bonds sold off the cyclical trade went parabolic again today, but then it rolled over later in the day. The question on the table is this the long awaited reversal of fortune?
If so, then hardcore believers in free money will soon learn the meaning of careful what you wish for, because the Fed warned them last week they have license to explode. And it would be awfully embarassing if they tried to pretend they didn't know. There's no Black Swan" event for idiots to hide behind this time:
In summary, all of the GOP governors who are now canceling jobless benefits for unemployed workers, should be sounding the alarm about this sham recovery and the monetary euthanasia, instead.
But since they are all monetary addicted bailout whores themselves they will instead learn the hard way.
Last year was just the warning. What comes next will be the lesson of a lifetime.
