Thursday, August 13, 2020

2020: The Year Of Living Dangerously

Global depression, fake stock rally, Herbert Hoover President, Fascist/Marxist political wars, what's not to like?

You can't make this shit up.

Now, at this latent juncture, as the global economy implodes, gamblers have crowded into a handful of massively overvalued Tech stocks which are deemed as "safe havens" from pandemic. All of which companies are currently under anti-trust investigation. In addition, the U.S. China trade war truce has ended and the trade war is resuming. On top of that, millions of families have just experienced a massive drop in unemployment benefits. However, complacency is rampant in Trump Casino because the economy has been fully replaced by the Federal Reserve balance sheet. Apple is now approaching $2 trillion in market cap, having reached $1 trillion two years ago this month.

Thanks to Dumbphone 11, which is one better than 10. 

Isn't it?

Meanwhile, speaking of living dangerously, we learned this week that the COVID vaccine(s) very likely won't work on fat people. In other words, the vaccine won't work on the people who are at most risk from the disease. The vaccine will only work on young fit people who have no plans to get vaccinated.

“Will we have a COVID vaccine next year tailored to the obese? No way,” said Raz Shaikh, an associate professor of nutrition at the University of North Carolina-Chapel Hill.

“Will it still work in the obese? Our prediction is no.”

The good news for Trump supporters, is that they don't need to boycott the libtard vaccine since it's not for them anyways. No immunity, no vaccine, no healthcare, no social distancing, no masks. No worries. Ignorant arrogance will be measured in body count, in the Republican tradition. This time on a biblical scale.

Speaking of vaccines, here we see that Biotech is rolling over hard deja vu of 2015 smash crash:

Since Tuesday, momentum Tech has staged its first bounce deja vu of February. This time however, the bounce came at the 50 day. Which makes the next stop the 200 day (red line):

The Nasdaq 100 backtested the upper boundary line today.

All of the indicators are lined up deja vu of February. Confirming this week as the likely top for the Tech bubble:

Here we see a third lower high in gambler positioning, as the glue fumes slowly wear off. The COVID rally's level of call/put ratio is the highest in HISTORY. Newbie traders are using rented capital to move markets. Which works great on the way up, however when the call options expire, it makes for a bidless market on the way down.

The lesson NOT learned in February will be learned now:

Recall February 26th, 2020:

“This bull market is not going to end until the public falls in love with stocks, and that process may just be beginning.”

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

A favorite tactic  is to swamp the market with call purchases early in the morning in an attempt to force dealers to keep buying stock. Up and up everything goes"

And when the last fool is found the majority of options expire out of the money, and then down down everything goes...

Case in point is Tesla, which is consistently the most active Nasdaq stock by dollar volume, as it was at the market top in February. Note that Tesla dollar volume is four times higher than the Nasdaq 100 ETF (QQQ).    

Apple and Tesla just announced stock splits to make it easier for home gamers to trade options

Tesla is tracing out an almost identical top as February. I marked wave (ii) on the equal weight S&P 500:

In summary, all of the above means that gamblers are piled into stocks on the basis of a useless vaccine that will in no way help the imploding economy.

Which this week leaves an S&P casino back at all time highs with the lowest GDP since the Great Depression.


Tuesday, August 11, 2020

Momentum Crash In Progress

The Tech/Momentum bubble is final(ly) imploding...

Today, the S&P 500 was mere points from its all time high set in February, when it spontaneously exploded from 20 points green to -30 points red at the lows of the day. 

From an Elliott Wave standpoint, today's "new almost time high" was actually the third lower high for the broader market and hence farcical to anyone except the ubiquitous fools who believed in it:

Today's selloff was all the more surprising given the fact that Tuesday's are almost overwhelmingly up days in Trump Casino.

Compliments of market manipulation around the weekly Wednesday VIX options expiration:

This is the year-to-date S&P point gain by day of week. What else to expect in Disney markets?

The Nasdaq (100) broadening top is now broken which puts first support at the lower tag line which is also at the 50 day moving average.

Momentum Tech, which includes mega caps and small caps alike, has a much bigger drop until support.

If February is any guide, then the 200 day moving average is the first counter-trend rally line:

Gold broke hard today along with the momentum trades, putting that dumbfuck reflation argument to rest. Bond yields had their biggest back up in weeks and yet gold traded inverse to the reflation trades. 

Nevertheless, if the February pattern holds, gold could see a fake safe haven rotation soon and a chance for another high. As we see below, the BTFD Team was pouring massive volume into GLD:

I have no short-term prediction.

Doing things in reverse today, that takes care of Trump Casino.

As far as the economy, Congress keeps dicking around with the second stimulus, because after all it's not their economic circumstances that are crashing.

"Don't expect a another stimulus check anytime soon.

While there's bipartisan support for a second round of direct payments, negotiators have walked away from talks without a deal, and most lawmakers have now returned to their home states."

The political environment right now can only be described as toxic. Reminiscent of the 1930s, the level of vitriol on both sides ahead of the election is hideous.

We are surrounded by two echo chambers of groupthink idiots. The inevitable endgame for a mindless corporate Borg that prizes the freedom of action, while wholesale abandoning freedom of thought.

Which is why freedom of speech has now become a liability in a society running amok with marketing-enabled sociopaths. Opportunistic sharks swimming in a sea of nihilism. Instead of bringing truth to light, freedom of speech has buried the truth beneath an internet wasteland of toxic disinformation.

It would be better to live under a regime of known propaganda than this current endlessly fragmented barrage of spam. At least everyone would know the truth is 180 degrees opposite the official Politburo Party line.

Sadly, all freedoms are wasted on a society of aspirational corporate drones. Now, giving rise to a multitude of infantile conspiracy theories. 

By all rights this impending market event should implode Trump's last chance at re-election. However, given the GOP proclivity for rigging elections, only a fool would make that prediction.

One thing we know for certain, no matter which way the election goes, sooner or later rage is going to explode.

As always, I am on the side of sooner.

"Let's cut off all stimulus and see what that does for sentiment"
"Good idea"

Monday, August 10, 2020

Front-Running Collapse

Global markets are 100% Ponzi now. See the idiot bubble, or be the idiot bubble...

Interesting call out of Wall Street firm Nomura via Zerohedge, indicating the deflation trade is over and the reflation trade will now lead the market higher. They base this primarily off of the nascent rotation out of Tech/Momentum and into cyclicals. The Zerohedge article indicates that a spike in Treasury bond yields is imminent. Unfortunately for that delusion, below we see that since the glue fumes from the March mega stimulus wore off,  bond yields haven't bought into ANY part of this reflationary circle jerk.

Meanwhile, cyclical stocks are front-running the second stimulus bill, which will be substantially smaller:

There are three scenarios on the table right now: One, Tech/Momo is merely taking a breather and about to sprint higher. The second scenario is the Nomura rotation, which according to them will see cyclicals lead the market higher. Or three, my scenario, in which everything explodes at the same time. 

Here we see the first scenario via Momo Tech is hanging by a thread and it's along way down to the 200 dma:

As far as the second sceario goes, I suggest it is merely a rotational headfake due to the NFP report and the impending stimulus plink.

Here we see small caps now as overbought (RSI top pane) as they were on Monday June 8th, the day after the NFP (Non-Farm Payrolls) report.


My hypothesis is that the reason we didn't see epic volatility in March is because during that major selloff, there was a massive rotation from cyclicals to growth/momentum stocks. 

Specifically, the stay-at-home bubble.

I suggest that when the four largest MAGA Tech stocks which now account for a record share of S&P 500 gains year to date, go bidless, that event won't be accretive to market returns. 

Meaning, I don't see Dave Portnoy's airline stocks leading the market higher.

In the spirit of maximum Ponzi, the gambling stocks are all going late stage parabolic.

The question on the table is when did we last see the entire market go bidless at the same time. And the answer was during the run up to the tax cut in 2018. When the tax cut went into effect, the momo stocks AND the cyclicals imploded at the same time.

What this would mean from a market sentiment standpoint at this juncture, is third wave down at all degrees of Ponzi trend. 

What I am trying to say is that this is the final rotation.

And, more importantly, THERE ARE NO SAFE HAVENS in risk assets. Shiny or otherwise.

Cash is king.

Saturday, August 8, 2020

History' s Biggest Collapse. Will Be Deflationary

Hard to believe, I know...

The stay-at-home deflation bubble is now competing with the hyper-inflation bubble. The one thing they both have in common is that they are both about to explode.

In the spirit of Hugh Hendry, Disney markets fully lived up to their reputation this past week. Providing all comfort-seeking denialists exactly what they paid for with their own misallocated capital. 

Disney's earnings are a case study for how Wall Street manipulates investor expectations. Earnings down, stock up:

"The Burbank entertainment giant posted a net loss of $4.72 billion for the three months that ended in June, Disney said Tuesday. That’s compared with the $1.43 billion in net income the company reported for the same period in 2019. However, the media and entertainment titan did better in terms of profit than analysts expected"

Any questions?

Note that the last time Disney popped - in June - the market rolled over. This entire rally in cyclicals is all short-covering by bears who think that bad news for the company should be bad news for the stock:

That explains why cyclicals are rallying. As I said at the top of this post, the hyper-deflationary stay-at-home bubble is competing with the hyper-inflation precious metals rally for supremacy.

BOTH will lose.

THIS was the week in which extended unemployment benefits officially ran out, leaving millions of families in the lurch. So it's very fitting that both of this era's dumbfuck bubbles went parabolic this past week. Apparently they are all of the mind that when household finances collapse, that's bullish for risk assets.

On Thursday in my last post I noted that consumption sentiment had collapsed in July and the U.S. misery index took the largest leap of any country. Consider that was BEFORE the extended unemployment ran out.

Care to guess what those figures would look like now?

On Friday we got the official jobs report which was painted with a happy spin because it was "better than expected". And yet zooming out to the big picture, here we see that the number of jobs lost still substantially outnumbers the jobs gained back since re-opening. 

Massive job losses AND declining unemployment benefits. All very inflationary, I know:

The dollar destruction theory hyped constantly on Zerohedge is a groupthink delusion of lethal proportions. Most of the world's debt is priced in dollars, which makes all dollar borrowers implicitly short dollars. Imagine what happens when the debt collectors come calling? Human history's biggest asset fire sale will take place as over-leveraged borrowers scramble for cash.

This week we learned that for some reason Euro bets reached a record high against the dollar.

In addition, silver officially joined the fake reflation rally.

Below we see silver on the 15 year chart vis-a-vis all commodities. We note that silver is decade overbought via MACD (top pane). We note that silver, which is considered also to be an industrial metal, is far outpacing regular commodities.

All delusion.

Of course, ground zero for delusion is the stay-at-home Tech bubble. Which ran into some problems late in the week:

In summary:

Super Dunce is about to collapse his Super Bubble and the crash will be biblical in scale and divine intervention

Thursday, August 6, 2020

Human History's Biggest Circle Jerk

This fake reflation rally is human history's biggest circle jerk without any comparison. The stock market is now inversely correlated to the economy...

The S&P 500 has now round-tripped back within 2% of the February highs, while consumer confidence is at the pandemic lows:

"Americans grew more worried about the economy toward the end of July after a fresh outbreak of coronavirus cases chipped away at the recovery and cast doubt on how quickly the U.S. will rebound from the worst health-care crisis in a century."

The level of sentiment is now barely above the pandemic low, erasing most of the momentum gained in late May and June as large swaths of the economy reopened."

Forward inflation expectations as imputed via Treasury Inflation Protected bonds have been soaring as investors have been flocking to the TIPs en masse. An advent that has ironically caused the inflation premium to become artificially bid up thereby collapsing real yields (Nominal rates - inflation). 

Not everyone is buying it:

"Treasury Inflation-Protected Securities (TIPS) and gold have lured investors, who reckon unprecedented monetary and fiscal stimulus will eventually produce higher prices. In June alone, investors poured a record $6 billion into TIPS"

“There is a fear that the Fed expanding its balance sheet is going to create an inflationary impulse...I structurally don’t see that right now.”

Basically what is happening is that gold investors and TIPs investors are locked in a happy circle jerk. The more TIPs get bought, the more market-imputed real yields collapse and the more gold investors bid up gold. Why? Because real yields are falling, don't you know?

All in the expectation of another Stimulus package, which if it comes at all will be a pale shadow of the first one.

Here we see that as it was in February, TIPs and gold are 100% correlated and TIPs are more overbought than they were in February:

Which gets us back to what is really going to happen outside of the happy circle jerk:

First, the stimulus-driven sugar high will crash with extreme dislocation. Worse than February. 

Next, defaults and insolvencies will soar, as will mass layoffs.

Collapsed consumer confidence will final implode.

Societal acrimony will rise.

None of which is inflationary.

Soon, even the biggest morons among us will realize Trump is unfit to lead. 

Any questions?

"The US is projected to undergo the biggest increase in economic misery across 60 countries as the nation grapples with heightened unemployment and fresh coronavirus hotspots."

The US was hit by both plunging inflation expectations and spiking joblessness. Economists expect near-term inflation to slide below 1% in the US as a drop in consumer spending drives steady disinflation"

As I said above, the bond market is officially clueless:

Getting back to Trump Casino, tomorrow is the monthly jobs report so who knows which way the algos will push Disney markets short-term. However, into this jobs report and the imminent Stimulus 2.0, shorts have been getting crushed, as everyone who doesn't believe in fairy tale endings gets universally punished. All of which is a necessary and sufficient condition for final explosion.

Who remembers that VIXPlosion 1.0 followed the FOMC meeting, corporate earnings, and the jobs report?

I do.

Move along, nothing to see here:

And the chart of the week is this one. It appears that not everyone will be surprised by what comes next.

Wednesday, August 5, 2020

In Idiots We Trust

We are witnessing the inevitable endgame for four decades of Supply Side Ponzinomics - monetary-stoned gamblers piled into risk assets while the economy implodes in real-time. As predicted by Hendry:

"The worse the reality of the economy becomes, the more we take on the reflexive belief in further and dramatic monetary expansion and the more attractive the stock market looks"


Supply Side Economics is inherently deflationary, a fact that has been amply proven during four decades of non-stop middle class obliteration. Trump even based his 2016 campaign on economic disenfranchisement - the famous "deaths of despair" campaign strategy. However once elected, he instantly reverted back to the standard playbook of robbing the poor to give to the rich, which happens to be inherently deflationary. 

Fortunately, we have central banks to paper over this deflation with printed money injected straight into risk assets. Which generates the all-important trickle down fake wealth effect. Another key aspect of Supply Side Ponzinomics. 

At this latent juncture, we have never before seen such a chasmic gap between economic reality and the stock market. Now led by the junkiest and riskiest stocks in the market. The very stocks that "benefit" from economic implosion aka. The CNBC/Cramer COVID-19 indexThe celebration of economic implosion of the real economy to the benefit of the virtual economy has now reached manic ludicrous levels as exemplified by the online retail stocks:

Here we see the largest mall operator in the U.S. - Simon Property Group - hanging on for dear life.

As we see, Trump's policies have been a disaster for the middle class from the day he took office. Trump-o-nomics accelerated economic implosion.

Make drilling great again? Didn't happen. The U.S. energy sector is now on life support, monkey hammered by COVID:

All of which is why today, economic acumen has been fully supplanted by gambling acumen, and not so much of that either. What we have are serial amnesiacs who never seem to remember how every bubble ends.

The overriding belief now is that the U.S. dollar is imploding because bond yields are collapsing along with the economy - all of which is good for "stocks". Per Finance 101, every idiot knows that lower interest rates axiomatically means higher net present value. Right? 

For some reason, the world famous discount cash flow model never seems to accurately predict when in the cycle cash flows collapse to zero or worse go negative. Because Excel lacks the feature called "accurately predict the future". So what we are left with is Wall Street analysts competing to keep their Magic 8 ball derived earnings predictions ahead of S&P 500 melt-up. 

This firmly entrenched view that economic implosion is ALWAYS good for stocks is now going to come under its greatest test in history, as gamblers go late stage manic on risk assets into a greater depression:

"Hiring slowed markedly in July as a renewed spike in coronavirus cases prompted some states and companies to roll back reopenings, data released on Wednesday shows. It is the latest sign that the U.S. economic recovery is at risk of reversing."

Payroll provider ADP said companies added 167,000 jobs in July, far short of the 1.2 million economists polled by FactSet expected...the July reading versus expectations is by far the largest disappointment in ADP history"

As far as the dollar goes, I suggest via this chart below that gamblers who are piled into Trump Casino are soon going to find it significantly more difficult getting out, than it was getting in. Because when the dollar reverses, cross-asset volatility is going to explode.

Here is a little known fact that today's denialists STILL haven't figured out yet: When the Fed prints money, yields RISE, and so does the dollar. The worst part of the March decline took place when the Fed primed the pump and sent the dollar soaring. They monkey hammered global assets.