Tech Implosion 2020: Hardest Landing

Twenty years ago in March 2000, the Nasdaq hit a new parabolic all time high and then imploded spectacularly. Good times...

I think we all see where I'm going with this:

Looks like Trump got what he demanded after all. For trapped bulls this is their last chance to get out. Rest assured Wall Street is selling with both hands as the very last of the dumb money pours in on the news. A red close will be fatal for the bulls.

And Donny.

Any questions?

Financials are going bidless on the rate cut news

The dollar carry trade just got monkey hammered by the rate cut. Another source of liquidity gone from U.S. markets:

Where was I...

On the run up to the Y2K top, the mass euphoria sucked in all of us newbie traders. Valuations were ludicrous, but we were told that valuations no longer matter. This was a new paradigm. The bubble had been fed by easy Fed policy in the prior year due to the LTCM collapse. The Fed called it a "mid-cycle" adjustment even though it was coming at the end of the longest expansion in U.S. history. No one questioned it. The same way they didn't question 2019's "mid-cycle" adjustment coming at the end of the longest expansion in U.S. history. Wall Street was taking full advantage of the euphoria to dump massive amounts of IPO junk into the casino which would serve to accelerate the collapse on the way down. Similar to how they dumped record profitless unicorns into the market last year which are now imploding.

The initial leg down took everyone by surprise, it was violent and brutal. Extremely shocking to those of us who had never lived through a bear market before. But then the next week the market staged a massive rally which made everyone believe that the worst was over. So we all doubled down. Unfortunately, the worst hadn't even started yet.

Back then there were four mega cap Tech stocks leading the rally. They were known as the four horsemen of Tech: Microsoft, Intel, Cisco, and Dell. As the smaller Dotcoms imploded spectacularly, massive amounts of money flowed to the four mega caps believing they were safe havens. The market became more and more skewed to a handful of overvalued mega caps. The same way it's skewed to MAGA: Microsoft, Apple, Amazon, and Google right now. When the four horsemen imploded that second week, they took the entire market down with them.

What is taking place right now is almost identically the same. Monetary lubed melt-up rally. Insane valuations. Thunderous crack lower last week. Trapped bulls doubling down. Rotation to a final handful of mega caps.

Of course, the major difference is that this isn't 2000. Back then the Fed had a 7% interest rate buffer. GDP was running at a 7% clip and the U.S. was running a thirty year high surplus. 

It was the best economy in modern U.S. history, making today's economy an absolute joke by comparison.

And to think, I haven't even mentioned the Coronavirus, 1930s trade war, collapse of China, global record low interest rates, mass money printing, political dysfunction, and Donald Trump as president. All unthinkable twenty years ago. No one would have believed any of today's insanity back then. 

In this era, gamblers have been lethally conditioned to believe that bad news is good news, worse news is better. This is how they ended up going ALL IN at the end of the longest cycle in U.S. history, with NO stimulus safety net. Sheer madness. 

Now it gets interesting. 

Bernie Sanders rising.

Crushing Big Pharma 

Big Oil

And Big Money

“If Bernie becomes the candidate and you assume Wall Street wants Trump to win again — and I think they do — then this is nothing but good news.”

It’s a perspective similar to the stance many held on Wall Street about Trump’s prospects in 2016"

Many surveys show the Vermont senator leading the president by as many as eight points. Wall Street pros generally blow off these numbers, suggesting once Trump is actually one-on-one with Sanders he’d be able to portray his opponent as an existential threat to the stock market, the economy and the traditional American way of life."



"More bailout please"

Super Tuesday

Shanghai Accord or Shanghai Surprise? Today's rally was either the last chance to get in, or the last chance to get out of Trump Casino. The stakes have never been higher...

Trump's presidency is now hanging on a Fed bailout.

Unquestioned faith in central bank's ability to cure viruses is about to be system tested. 

Over the past several days, the Fed, BOJ, PBOC, IMF, World Bank have collaborated to calm markets. Now in addition, tomorrow the U.S. will lead an emergency meeting with G7 financial leaders to determine how best to confront this crisis. Treasury Secretary Mnuchin and Fed Chairman Powell are leading the 7am Eastern meeting.

It can come as no surprise that today's epic rally went vertical into the close, featuring the largest rally in a DECADE. 

Clearly, expectations are high. On crack.

Zerohedge is already calling it the Shanghai Accord 2.0 - the repeat of the global coordinated stimulus that bailed out markets four years ago in 2016. 

"The meeting comes as futures markets are betting that the Fed will deliver a big dose of stimulus to shield the U.S. economy from the disease’s impact."

Step back for a moment of sanity.

How will a big dose of stimulus shield the economy from a spreading virus? 

It won't. This has nothing to do with the economy. 

Trump's two stooges are now tasked with keeping an epic asset bubble inflated deep into global depression so that Trump can rig another election. End of story. That's all this is about.

Trump wants to expend ALL of the remaining stimulus reserves to keep his Super Bubble inflated. Who would even consider such an idiotic idea as expending ALL of the stimulus merely to lubricate markets. A narcissistic psychopath that's who. 

Meaning the ONLY thing this meeting can accomplish is to drive an even bigger disconnect between fantasy and reality.

On the surface, having no other facts and data, the concept of another Shanghai Accord is speciously attractive. Assuming we leave aside the fact that it will have zero impact on the real problem at hand, the spreading virus. 

The only question for TRAPPED gamblers is what can it do for Trump Casino? Knowing of course that a fair amount of the good news is likely already priced in. And tomorrow morning pre-open we will find out exactly how much.

First off, we know the technical set-up is perilous.

Here we can see the exact positioning of the S&P 500 relative to the last two major selloffs. And form your own opinion.

We know that the virus is spreading out of control globally and the economic impacts are growing by the minute as the global supply chain shuts down and travel plans are canceled en masse.

We know that gamblers are ALL IN and totally unhedged eagerly anticipating their Fed bailout to make them whole again after last week's pounding.

We know that market liquidity and short positioning are both at record low.

We know that already multiple brokerages are having technical issues dealing with the current volume levels. Last week it was Schwab, Fidelity, and Ameritrade. Today, on the largest up day in a decade, the Millennial-preferred trading platform RobinHood was down ALL day. I see lawsuits.

However, there are a few other "anomalies" I've noticed recently. One of which is my proprietary Super Crash ratio which reached a new ludicrous extreme today compliments of algos manipulating the S&P futures into the melt-up close.

As the Trump sugar high went into full crack smoking mode:

Nevertheless, here we see the damage wrought last week, as the Nasdaq down volume was decade high:

With all of these combined asinine risks, is it even responsible to speak of a "Shanghai Accord 2.0?"? Of course not, it's 100% imagined reality. Just more stooges doing Trump's bidding of conning the populace to his personal benefit.

Only a useful idiot would believe tomorrow's meeting will spark another two year rally. Which by the way, the February 2016 rally was already fizzling out by July 2016, it was Trump's election and tax cut that extended it by another year.

The real problem if we have to go there, is positioning ahead of the event. Back in February 2016 gamblers had capitulated. They were in a defensive mode. They were not ALL IN junk stocks. They were not anticipating a bailout. The problem with front-running central banks is that when a bailout actually arrives it sparks a sell the news reaction. Because no one has any capital left to deploy. You're certainly not going to get the smart money coming off the sidelines to play bagholder to Trump's re-election rigging gambit.

I will say this much, if this last ditch election rigging gambit DOESN'T work, it's game over for Trump.

And the people who believe in rigged elections.

Here we see some differences between now and 2016:

Circled in blue:

The far better comparison is not 2016, it's 2008, when another very famous bailout was approved.

Of course that was the mother of all sell the news events. 

In summary,

Prepare for Super Tuesday

Bailout Whores. Wanting To Explode

Today's ideologically flexible bailout whores, I mean "capitalists", are one margin call away from embracing "socialism". The Fed and BOJ bailed them out on Blue Monday. Cue Super Tuesday...

Trump is the biggest bailout whore of them all. But then again we all knew that from his casino bankrupting career. After excoriating the Yellen Fed in 2016 for keeping rates low, he has been excoriating her replacement Powell non-stop to lower rates...

Because if it's one thing this guy likes, it's cheap money for casino gambling:

Trump is getting desperate, he knows that pandemonium is closing in:

It should be readily apparent to today's attention deficit gamblers why expending all monetary ammunition BEFORE the actual recession is a bad idea. It's an idiotic idea, which is why Trump likes it so much. Nevertheless, today's gamblers are bailout whores. Here we gain some insight on the downsides to this approach:

ZH: Dear Fed You Are Perilously Close To Liquidity Trap

Dear Fed, 

On Friday you gave yourself the option to ease and provided a bit of calm to the stock market. It won’t work. Don’t make the mistakes the BoJ and ECB have made in trying to paper over structural problems with liquidity. If you do, your actions will be deflationary and you will devalue your monetary tools. [What little you have left]

"...Moving too early, in order to support confidence (let’s admit it, stocks), will put you in a currency war you cannot win. Other central banks, who are missing their inflation targets will follow swiftly, reducing the FX benefit of your easing. By moving to support “confidence” (stocks) and “transmission” (spreads) you will in fact be generating deflationary forces."

Of course the Fed's soothing words on Friday are what put a bid under the market and got the party started. 

Then, in coordinated fashion on Sunday night the BOJ ALSO promised to support markets and they then injected a massive dose of liquidity which further ramped markets on Monday morning. 

These feel-good sugar rallies have the effect of clearing out the short sellers. But then the high quickly fades and the market falls even faster in the next leg down.

This has been the story of the past week - stair-stepping lower with three wave rallies each of greater size leading to greater declines:

You know you're an optimist when:

In other words, yes the Fed and BOJ saved the day. Monday to be exact. However, they ensured a much bigger implosion when their sugar rally rolls over. Not to be left out, the PBOC will deliver a nice tape bomb for the Nasdaq, compliments of over-lubricated quarantined gamblers. 

On the verge of third wave down at all degrees of overnight panic

But that's a problem for another day. Because if it's one thing this society has proven, if they can put off any minor discomfort for another day, they will do so over and over again until it all explodes with extreme pandemonium.

"The Fed saved the day"

"That's all that really matters"

"It's called the 'Powell put'. It means you don't need to hedge"
"I know"

Pandemonium

We are now experiencing the diminishing marginal returns of simulated prosperity. Rampant hysteria over the Coronavirus is doing far more damage than the virus itself. When they close the Waffle House then I'll panic...

The number of people who have died from this virus is a rounding error relative to the people killed by McDonald's and Coca-Cola every minute of the day, and yet the comfort-seekers at large have decided to cancel life to ensure they have zero risk of dying. Welcome to "life" in the old age home.

In the fullness of time, these pussies will realize they pushed the global economy into depression.

Any questions?

The reason this virus is spreading so far and fast is because most people who have it don't even know they have it. That's how "bad" it is. I'm pretty sure I had it myself last week. It's like Ebola, except not even remotely. Nevertheless, all manner of conventions, sporting events, and travel plans are now being cancelled. There has been only one death so far in the U.S. On par with the number of people who die every second from french fries overdose (Rough approximation). 

"We were worried about the virus, so we canceled the economy"

https://data.oecd.org/gdp/real-gdp-forecast.htm#indicator-chart

The number of people who die in an economic depression is astronomical. Due to rampant poverty. The number of people who will be affected by this infantile pandemonium will be incalculable. And yet we are a society that only reacts to visible risk, while ignoring secondary factors. We are a society of the spectacle. Token generosity while silent poverty remains totally invisible.

We are entering a very troubled time indeed. 

If it's one thing we've learned in the past decade it's that this society will do ANYTHING to avoid short-term discomfort. We've seen it in spades via Disney markets and all of the asset distortions gladly caused to prevent facing economic reality.

Nevertheless they ALL end up imploding.

Here we see the limits of printed money via the Japanese Nikkei which has gone nowhere for two years despite non-stop printed money. This is due to the iron law of diminishing marginal returns from simulated prosperity.

This is a society desperately afraid to change their ways, so they continue blundering down the path of failure until inconvenient reality explodes in their face time and again.

Which is why helicopter money is inevitable. When today's ideologically flexible bailout whores switch from being "capitalist" to being socialist at the speed at which their Netflix positions get margined out, heli money (universal income) will arrive. Not if, only when.

In the meantime, brace for "acrimony".

And needless to say, the odds of Trump getting re-elected are now the limit approaching zero. My 2020 prediction of Trump incarceration and mass rioting is well on track.

This is what QE will look like in extreme economic deflation:

Biblical Meltdown: Base Case Scenario

Those who believe the selling is over, were not trading in 2008 nor Y2K. The real selling isn't over, it hasn't even started. Well-conditioned gamblers were buying the dip all week, at the advice of proven psychopaths. My bold prediction for the coming week is an epic meltdown in global financial markets.

Bulls are now trapped in no man's land praying for a central bank bailout. Sadly, central banks and other known psychopaths got them into the bubble, but they can't get them out of a bubble that is imploding in real-time. All talk to the contrary is purely self-motivated delusion by gamblers who know they are trapped. And whose efforts this past week to buy themselves out of a crash failed miserably. But not for lack of trying. 

All of which means that the Trump super bubble is running perilously low on dumbfuck capital. 

Zerohedge does a decent job of explaining the various factors that drove this epic Coronavirus melt-up and last week's ensuing mini-crash. But then they come to an asinine conclusion that the selloff may be over for now.

First, they lay out the manic reach for risk that culminated in February of all months. An entire month of rabid speculation while the Coronavirus raged in the background. As if anyone couldn't see that ending badly. 

Next, they show some charts indicating that the momentum machines have flipped from massively net long to now net short. Why that means that the selling is over, is not for me to say. Is that because these machines only fuel momentum on the upside? Hardly. I predict all of these machine driven momentum strategies will be totally outlawed in the very near future. "CTAs" and all of this other crap.

Then they explain that the Millenials who drove the melt-up via various message boards got pole axed in the past week. As their leveraged bets got margined out. Not hard to believe.

However, that's where I part ways with their conclusion that the selling is over. Because while the factors that drove the melt-up to unsustainable valuations are now gone, the Mom and Pop home gamers went ALL IN during the crash.

Why? Because they were told to.

By Trump, Kudlow, Suze Orman, Jim Cramer, and Barron's this week. And by their own personal financial investment advisors the ones that were used car salesmen before they found their true calling in life. 

But it gets far worse, because the market manipulation I described the week before the mini-crash whereby the weekly options are being used to drive the market higher, was confirmed by Bloomberg. In other words, the manipulation of weekly options allowed a virtual boiler room of Millennials to drive the largest Mega Cap Tech stocks to obscene valuations. A super bubble that remains intact, with no catalyst to drive it higher. And now come the Coronavirus-linked earnings downgrades in Microsoft and Apple. The two largest cap stocks on the planet. 

But what could go wrong?

"History hasn’t been kind to people claiming to have a magic hand. The latest sell-off, driven by a new wave of coronavirus fears, shows how quickly markets can turn on you. But even veteran traders have trouble dismissing a 900,000-user Reddit forum called r/wallstreetbets, or r/WSB for short, whose tips and tactics have shown an uncanny ability to push prices, at least for the short term."

“There is no denying the fact that in the month of February 2020, the public is back,”

Members of r/WSB believe they’ve discovered a kind of perpetual motion machine in the interplay of stocks with options contracts"

To summarize what I described over a week ago, these morons were renting insane amounts of cheap weekly capital to push Tesla, Amazon, Microsoft, Apple, and other momo stocks higher. Until they exploded.

"At least from the dealers”—the middlemen—“they’ll tell you in big tech names, flows are substantial, and it’s moving things,”


So now that momentum has reversed, these guys are out of the market, and the algos are pointing down now. Which gets us to everyone else in the market. The ones who were buying the dip all week:

“The S&P 500′s drop has improved the risk/reward ratio but we need to see panic readings before stepping up.”

But while the drop in stock prices and bond yields was sharp fast, there still aren’t many signs of outright capitulation in the market after last week’s sell-off, JPMorgan’s Nikolaos Panigirtzoglou said in a note."

Here we see Rydex bull / bear asset now versus prior selloffs.

One of these is not like the others:

Beyond home gamers, it gets far worse.

Amid crude oil annihilation, speculators RAISED their bets this past week:

They are raising their bets into a third wave down:

Amid RECORD low bond yields, somehow speculators remain bearish on Treasuries. This has to be the MAX pain trade of the past year:

S&P futures speculators RAISED their bets this past week:

The entire repo rally evaporated this week. Four and a half months of melt-up gains gone in five trading sessions:

And despite epic realized volatility, vol speculators remained net short this week:

But the most lethal advent of this past week is that the largest bubble never imploded.

As the crash ratio shows, investors migrated further towards the largest cap Tech stocks in the past week. Seeking safe haven in the most overbought and over-owned stocks that were artificially bid up by options speculators:

1. Tesla
2. Amazon
3. Apple
4. Google
5. Microsoft

So for all of the hopium talk about "deleveraging" there was only "BTFD" coupled with removal of the momentum strategies that bid up the bubble in the first place. The net effect of which was to leave Mom and Pop investors holding the bag. 

Back in 2015, the Shanghai Composite had a very similar melt-up in the face of worsening economic news, driven by the over-use of monetary stimulus coupled with rampant speculation. When that bubble burst, the PBOC stepped in to do everything possible to stop the crash. They banned short selling, then they shut down the market for days at a time. Finally, they banned institutions from selling. Nevertheless, the market still found its true price -60% lower.

I called it Shanghai Surprise. Which is what I expect to happen this coming week. 

Ironically, this headline which could be circa 2015, is circa 4 days ago. As we know, we live in a society that never learns:

"A surge in small-cap Chinese stocks, fueled by government stimulus measures to support the virus-hit economy, is triggering fears of a repeat of the boom that preceded the 2015 market crash."

“This is already a bubble. It’s a game of the greater fool”

“With all the millions and millions of Chinese on lock-down, more people have more time to dabble in the stock markets,”



These are the Chinese stocks that are cross-listed on U.S. markets. The largest of which of course is Alibaba. 

In summary, China Tech and the Nasdaq 100 are the last bubbles. Now inextricably tied via excessive speculation.

Feb. 3rd, 2020:

Last week was merely the preview:

I have said all along, there is only one safe place to hide right now.

And there is only one group of people who got it right this past week.

The same people who have been betting against Trump since his election: