Thursday, August 20, 2020

The Madoff Moment

Never before have so many lies been bought and believed as are owned now. For today's Idiocracy who are 100% convinced that printed money is the secret to effortless wealth, this revelation can only come as a total shock...

Mad Man infotainer Jim Cramer is of course well renowned for his circus antics and his unique ability to contradict himself from one day to the next, as required by bipolar Disney markets. What can be viewed as good news one day - rising unemployment/more Fed dopium can be just as easily construed as bad news the next, depending upon which way the algos are flowing. Today's rally was sponsored by the first monthly rise in weekly claims since March. Bearing in mind, that at 1.1 million, today's level of jobless claims is STILL higher than in EVERY week of 2008/2009. 

So how can it be that EVERY week the NEW (initial) unemployment claims exceed the maximum reached in 2008/2009 amid a stock market rally? For that we turn to the Mad Man himself, who once in a while stumbles upon the inconvenient truth and lays it out in a way that few of today's pundits would dare to suggest. Here in this diatribe, Jim Cramer sets forth the reason this is the most dangerous delusion of our lifetimes.

“We’ve had a magnificent V-shaped recovery in the stock market, but the stock market’s not a great reflection of the broader economy anymore”

“Just look the stocks that have brought us to these levels — they’re not the recovery plays. In fact, they are the opposite." 

“The winners in this market are the companies that are most divorced from the underlying economy. The actual economy is in precarious shape, especially now that the government’s stimulus package has run out and Congress went home for the summer rather than trying to come up with a replacement”

Take a step further and realize that the new technology companies leading this rally are gaining market share at the expense of the real economy. As small businesses fail by the millions, the largest public companies are now taking market share from the collapsing businesses. 

This entire rally is a celebration of collapse, the likes of which we have never seen before.

So we clearly see that things are "different" than they used to be, in more ways than one. However, another major difference has been in the corporate reaction to the COVID collapse versus what was seen in other recessions. During ALL prior U.S. recessions, corporations were actively deleveraging their balance sheets and preparing for economic downturn. However, in this worst recession since 1930, they are adding new debt at the fastest rate in history. 

Why? Because they are convinced this is NOT the end of the cycle. 

You see, most independent bloggers on the economy and markets now hold this view that the world is controlled by "the elites" and the "Deep State" - Jeffrey Epstein (who is dead by the way), Bill Clinton, and George Soros etc.

Unfortunately, the people who believe all of that crap are total fucking idiots. Super dunces who confirm today's Idiocracy. Roughly speaking, there are now only two classes of people from an economic standpoint - those who garner their wealth from their jobs aka. the working class, and those who garner their bulk of wealth from Fed policy aka. the Casino Class. The Casino Class are in the upper echelons of everything - business, academia, finance, media, government etc. These are the people who have come to believe that stocks are more important than jobs, as they watch their Monetary-inflated unrealized gains increase day in and day out, compliments of ever-worsening economic news, in the Hendryite tradition:

"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."

However, what these people don't know is that they are taking part in the largest economic blunder in world history.

Where this gets interesting, is that as of this week the S&P 500 has now charted a double top with a slight overthrow. Overly aggressive bears who believe that stocks follow the economy, have been summarily monkey hammered. And newfound bulls are convinced this is a new bull market.

Which sets up maximum pain all around, in the tradition of Disney markets. 

The last time we saw such a rapid (albeit on a smaller scale) short-covering retracement rally, was at the top in 2007. The market peaked in July, crashed, and then final peaked in October led by Tech stocks. Bears got rinsed and bulls went ALL IN at the all time high.

Similar to right now:

Sound familiar?

Zooming back to the one year view, here we see that S&P breadth rolled over ahead of the market in February of this year, and bottomed ahead of the market in March. The pattern is repeating now:

A third wave down means that this decline will make February's record-setting clusterfuck seem like a picnic by comparison.

Some people like to learn the hard way. Rest assured, this is the hard way.

What this society has yet to figure out is that there was not just one Bernie Madoff, there is an financial entire industry full of Bernie Madoffs. Who have been emboldened by Trump's deregulation of their industry, to now be lying their asses off, in the Wall Street tradition.

Circa July 2007:
Citigroup's CEO Chuck Prince Wants To Keep Dancing While the Music Is Playing. Can You Blame Him?

"The Citigroup chief executive told the Financial Times that the party would end at some point but there was so much liquidity it would not be disrupted by the turmoil in the US subprime mortgage market."

In summary, these massively leveraged "stocks" people now own without any regard to over-valuation, are all just call options on the end of the cycle.

Which contrary to popular belief, is now. 

We are about to see a seismic financial dislocation on a biblical scale. One that finally resolves today's chasmic wealth inequality.

Just not in the way that is expected. 

Tuesday, August 18, 2020

Smash Crash 2020

The length of time this takes to implode, is measured in the number of dumbfucks piling into Trump Casino. Don't blame me, you know these people too...

Five years ago this week, Hugh Hendry's imagined realities 2015 came crashing down. It all started out so well - 25 year low GDP in China, a massive melt-up liquidity bubble, global RISK ON party. But then it all exploded "without warning".

2014 End of Year Shareholder Message:
"China is set to record its weakest growth in GDP in 25 years. Yet it seems to have entered a bull market and may be where we deploy much more of our risk capital next year. That's because the recent exuberant run up in onshore Chinese equities seems to me to amply demonstrate the power of imagined realities."

The Chinese state is the largest shareholder in the Chinese financial system. That surely makes its ability to stave off a liquidity crisis pretty much limitless"

Come to find out by August 2015, it wasn't limitless after all.

Good times:

The main difference between then and now is that risks are 10x greater now, as is the Tech driven liquidity bubble. We learned yesterday that this is now officially the longest Nasdaq melt-up in history. The prior longest melt-up in history was the rally that exploded spectacularly in February of this year:

"The Nasdaq-100 just set a new record: Its 20-day simple moving average (SMA) has been rising for 89 consecutive days.

The prior record ended at 88 days on Feb. 21. We remember well because stocks went into free-fall thereafter."

In other words, the two longest melt-ups in Tech history, in the same year. The chance of that happening outside of Fed balance explosion, is the limit approaching never happened before.

Looking back in retrospect, market pundits will realize that the COVID crisis sparked the final cycle rotation out of value stocks into a fifth wave stay-at-home Tech stock blow-off top.

MACD lower pane, shows the streak above the 20 dma as the net difference between one day and 20 dma > 0:

For the past week the S&P 500 has been staging an epic battle with its February all time high - Amid chasmic divergences, the likes of which we have never seen in history. Which is why I am not calling for a crash, I am calling for a binary explosion of risk.

Here we see that the algos have crushed volatility down to the same level that attended the February top. 

Today, the S&P 500 finally closed above the February high. Unconfirmed by the Dow, the Russell 2000 small cap, banks, transports, mall retail, defensive stocks, and global stocks.

Here we can see that the average U.S. stock has been trending lower for three years now.

"Safe havens" are ready to roll.


I don't know if gold will make another new high, before it implodes again. Or not. 

Banks are at the key uptrend line. Notice the double fractal - the rally into June is the larger fractal, and the rally since June is a smaller version of the same rally. Indicative of economic cyclicals in general.

As it was in February at the S&P top, the PBOC has been juicing global markets. Which is why gamblers are well lubricated for what comes next:

"PBOC adds most money to markets since early February"

Those who evince ultimate confidence in central banks to create bubbles and keep them permanently inflated, are about to learn their final lesson.

The one they didn't learn in 2015 and in February 2020:

$USDJPY already going RISK OFF

Even within the Tech sector, the majority of Tech stocks are already rolling over. 

What is still driving the Nasdaq is a rotating handful of parabolic stocks, led by Tesla. Yesterday, Tesla traded more dollar volume than ALL of the MAGA stocks and the QQQ combined. Yes, you read that right. A function of its stratospheric price x above average volume.And Robinhood gamblers going full retard.

Yesterday's most actives: gained another 25% yesterday.

And fittingly, Dave Portnoy lead gambler, is getting richer by the day in Trump Casino. Because that's how ALL pump and dumps work. A handful of con men followed by multitudes of dumbfuck acolytes. 

In summary, this is a final Tech blow-off top in stay-at-home stocks while the economy implodes in broad daylight. The rally since the March low amply demonstrates the power of imagined realities and conflict of interest:

"While Wall Street has gotten more excited about the economy since March, U.S. household sentiment remains depressed"

Sunday, August 16, 2020

The Big, Fat, Moron Bubble

Never before have so many been conned by a well known con man. Trump's big, fat, ugly bubble is by far the biggest bubble in human history without any comparison...

‘Never before have I seen a market so highly valued in the face of overwhelming uncertainty’

The GMO investor said that only the Great Financial Crisis of 2008-09 represents a parallel to the so-called V-shaped, fast and potent, bounce higher that we have observed in the market."

I suggest that is not actually true. The only "V-shaped recovery" was in Tech stocks

Here we see banks are three wave corrective at multiple degrees of trend:

Put it this way, there is so much uncertainty, we don't even have a clue how overvalued the market is right now. Currently, Wall Street analysts are tripping over themselves to raise price and earnings estimates in a vacuum of suspended forward earnings guidance and economic information.

For those who don't understand Ponzinomics, here is how it works, however don't be surprised if you still don't understand it, because you would need a PhD in economics in order to comprehend something this stupid.

When the economy is fully imploding as it was in early March, investors panic sell risk assets causing massive financial and economic dislocation. As the selloff progresses, it becomes incumbent upon central banks to buy up Treasury bonds in the secondary market in order to provide surplus market liquidity. That bond buying forces the sellers of said T-bonds to ripple further out onto the risk curve into municipal bonds, junk bonds, dividend stocks, S&P futures and eventually high flying junk stocks. The goal of the central bank is to reverse the capital flows out of markets and push capital back INTO markets. All while the economy implodes in real-time.

Here we see that the gambit worked fantastic:

Full Retard asset managers who sold at the bottom are now fully back to locked and loaded at the top again. Don't let anyone tell you that fund flows don't matter - they do. When everyone is hitting the bid or heading for the exits at the same time, that moves markets. To extremes. 

Let's step back to the economy for a moment. We now know that the vaccine won't work on fat people which is about 80% of the U.S., ballpark estimate. Throw in the anti-vaxxers who are 1/3rd of the country, i.e. every Faux News viewer. Throw in young people who won't get vaccinated, don't respond to polls, and don't believe in forced celibacy. Which means I (unscientifically) estimate that only a small subset of the population will be vaccinated and/or immune one year from now. Which means the forced economic lockdown will continue. 

In addition, summertime is peak economic activity in the travel and leisure parts of the economy. Bars and restaurants have the use of outdoor patios to further distance their customer load. However now we are going back into the dark months amid a virus spike and sans a viable vaccine. You don't have to be a genius to figure out that this economic implosion is going to continue for at least another year. 

Meanwhile, policy-makers are still FAR behind the curve on providing adequate fiscal stimulus to keep the economy afloat. And even if they eventually do, under the current lockdown regime what part of the small business service economy exists one year from now, is unthinkable. 

All of which is highly deflationary, and explains the chasmic divergence between stocks and bonds.

One of these is not like the others:

There are far too many economic divergences to list, think Energy stocks, airlines, banks (shown above), hotels, restaurants, mall retail etc. 

However, one of the largest divergences between economic and financial reality has opened up in the housing market:

Here we see collapsed housing starts and parabolic homebuilder stocks. Which used to be highly correlated:

Here is the short-term view of homebuilders.

Any questions?

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"