Monday, September 7, 2020

Fear Of Missing Crash (FOMC) 2020

Every bubble gets bigger and dumber than the last, as do the people who believe in them. This fake "bull" market was only confirmed by parabolic Tech stocks that are now imploding. We are told that money will now rotate to the stocks that are already in a bear market...

Global depression, uncontrolled pandemic, existential election, mega Tech bubble. No matter how bad things get, the burden of truth will always fall on us skeptics of Disney markets. Because for the rest, there is undying faith in easy money and central bank market manipulation. Which is what has led today's gamblers to take ever-greater risks. Central banks have sponsored a tremendous fear of missing crash "FOMC":

mor·al haz·ard

"lack of incentive to guard against risk where one is protected from its consequences"

With respect to options speculation and manipulation, this was the biggest FOMC rally of the entire cycle:

Bullshit markets have a way of sucking in otherwise fairly intelligent people. Which is why, statistically speaking "no one sees this coming", far too many otherwise intelligent people got onboard. One thing I've noticed is that this era's bears - as few and far between as they are - tend to get less bearish as the market rises. They are so busy getting trolled by morons telling them they are wrong, that they begin to lose conviction. It's called capitulation. And we are going to see it over and over again in the coming months and years. 

My overall hypothesis remains that the Tech bubble is now final imploding and it will detonate MOAC: Mother of All Crashes. As I wrote last weekend, this renewed decline will make the March decline seem like a picnic. Featuring futures limit down and limit up moves, day session trading halts, ETF flash crashes, and offline brokers. Central banks will be powerless to stop the explosion once it begins. However, I expect massive short-term rallies the likes of which we have never seen before. Followed by renewed crashes. In other words epic volatility. When the dust settles the public will have lost all confidence in Disney markets. Yes, I mean it.

So far, the path of this top and implosion are similar but not identical to the February top. Below I will indicate the similarities and differences. 

First off, it's clear that most of today's gamblers were not around in Y2K, or if they were they have late stage dementia. Because the vast majority of people today can't recognize a Tech bubble when they are buying one with both hands. History will say that the broader market imploded at the COVID top in February, and the resulting crash set off a final deflationary rotation to Technology "safe havens" aka. Jim Cramer's COVID19 index. The broader market of economic cyclicals never even remotely confirmed the new "bull market".

When the market became more and more skewed towards mega cap Tech stocks, it exploded at high altitude.

Last week, the Cramer COVID19 stocks got monkey hammered:

Most of today's pundits are already calling this a mere correction in a new bull market. Of course the future is uncertain, so when any selloff begins it can be anything anyone wants it to be, and in the age of con men that is a lethal proposition. So far, the technical indicators are too vague to convey the magnitude of what is coming. 

Which is why we need to step back and consider this situation in the broader context. If this were a technical correction which is formally defined as -10%, then on the Nasdaq it should already be over by now, because the Nasdaq tagged -10% down on Friday morning. Here below we see that relative to the 200 day moving average, the Nasdaq remains more overbought than it was at the February top. Which means that if we use my definition of a correction - tag back to the 200 day moving average -  which is a routine occurrence in any bull market, then this "correction" is only half over. 

The next point I would make is that this is a Global Tech bubble, not just a U.S. Tech bubble. Many of these mega cap Tech companies trade on multiple global exchanges around the clock. We also see that this bubble has been record overbought for almost three months now. In comparison to the February top, this one is vastly more overbought and it has lasted far longer, which by today's Idiocratic logic means it will continue forever and end happily ever after. 

But it's in the re-entry to the atmosphere where it's going to get dicey for Major Tom. Because the higher these mega caps fly the harder they land. This past week Apple reached $2.3 trillion in market cap - more than the entire Russell 2000 and more than the London FTSE 100. Then we found out later in the week it was mostly due to market manipulation. 

Here we see Apple remains record overbought and 30% above the 200 day moving average. Notice that realized volatility (lower pane) is skyrocketing:

As I write Monday morning Labor Day, the S&P futures are clinging to the breakout above the February high as Europe catches up with the Friday afternoon rally in the U.S. Tonight should be far more interesting with everyone returning from summer vacation. Going back to my posts from the February top, I was interested to recall the uncanny similarities between then and now around market manipulation using options. Back on Thursday February 27th on day six of the initial crash, one of the charts I showed was of Momentum Tech and how it had been soaring and crashing around weekly options expirations. Below is the current view of those same stocks. As we see they have been pounding support for two months now since early July:

In summary, today's pundits are convinced that economic fundamentals, logic, and facts no longer matter to Disney markets. Central banks can control any and all scenarios as they arise. Unfortunately, what they forget is that you can only go ALL IN once. And the way that central bank alchemy works is that it incentivizes fools to take unwise and irrational risks. Until they explode without warning. Rinse and repeat. Until there is no one left to implode.

As we now know the majority of today's active money managers and financial advisors got suckered big time by Softbank using options manipulation to rig the Tech bubble. Now, however, the blood is in the water and everyone knows it was a massive con job. Getting out of these positions will be a lot harder than getting in, including for Softbank. Because notwithstanding Zerohedge's valiant attempts to intellectualize stupidity, every speculator since the beginning of time has dreamed of bidding up their own positions. For some reason today's PhDs can't understand, it never works.

Ultimately one ends up being their own greater fool.

Saturday, September 5, 2020

MAGA 2020: Doubled Down On Donny

Since the beginning of the Republican National Convention (Aug. 24th), betting odds of a Trump victory have surged in lockstep with the stock market. Gamblers have been betting with the odds makers and their call options, on another Trump win...

There is only one thing that can stop them now:

The Republican National Convention which started August 24th, ignited an eight day vertical robo rally to new all time highs peaking this past Wednesday. Previously, the February implosion had been the fastest crash from an all time high to a bear market in U.S. history. So far, this one is even faster, which if it continues will make last week's RNC the biggest bullshit trap in history:

It's nine weeks to the election and per tradition the Democrats can't find their ass with both hands. Something about being the party of tolerance has enabled them to tolerate extremely intolerant left wing jackasses. With every violent protest and riot, the odds of a Trump victory grow larger. As it was in 1968, the nightly protests and anarchy during that ill-fated summer carried Tricky Dick to victory in the Fall. The same will happen again, if this trend continues:

However, it's important to remember that this is not 1968. And this is no longer a superficial culture war. Since Nixon was elected, the middle class has been decimated by right wing ideology, one industry, factory, and job at a time. Which is why the right would love for everyone to believe that this is strictly about race wars, however, beneath the surface this has absolutely nothing to do with ethnicity.

This is 100% economic ideology. 

Over the past four years, Trump's signature strategy of robbing the poor to pay the rich has exploded wealth inequality to Banana Republican levels. During the COVID lockdown, things have only become far worse. It's no coincidence that the riots and protests kicked in soon after the lockdown began. Under the banner of BLM, but inequality protests nonetheless.

Since the COVID lockdown began, the economic dislocation to the working class has grown steadily worse. Meanwhile, the stock market has been moving steadily higher, creating the largest divergence between fantasy and reality in U.S. history. A divergence which so far has allowed today's so-called "elites" aka. everyone who doesn't give a fuck about anyone but themselves - to ignore the uneven distribution of printed funny money. These people are the sole beneficiaries of Federal Reserve socialism. For the rich.Therefore, they are universally of the mind that the economy no longer matters, only Fed stimulus matters. This article is typical of the type of ludicrous idiocy currently on offer at this critical juncture:

"From the bull’s perspective, not a lot has changed"

"Bullish investors see the promise of lower interest rates for years to come and further injections of money by the Federal Reserve into various parts of the financial system, along with perhaps another fiscal stimulus from the government, as buttressing the market and offering a floor against future dramatic losses"

Since the current bull market kicked off in March, there have only been two pullbacks of more than 5%. Recent bull markets have tended to have three or four setbacks over the first nine months”

Got that? A new bull market, in a new economic depression. As I've pointed out, the 1930 headfake rally lasted five months, which is the same duration this one has lasted.

"This bull market is just getting started"
"Depressionary interest rates are the key factor"

Four years and untold thousands of unaccounted Trump lies later, we have reached a critical juncture. Yet again, the Democrats need all the help they can get defeating the Anti-Christ. Being more generous, tolerant, and intelligent than the other side never seems to work. Alt-Christians have a fake history to uphold and delusional exceptionalism to propagate. Bounding down the road to Perdition behind their beloved circus clown. They have a date with destiny to be shit canned along the likes of every other failed tin pot dictator in history.

It was four years ago this month that Trump told just one of so many thousands of lies to come. He said that the Fed had created a big, fat, ugly bubble that would implode when Obama left the White House for the golf course.

Then he spent the next four years making it far larger and FAR more lethal.

It's high time for this Roman Circus to end.

In summary, Forrest Trumpians are doubled down on habitual lying, hence what comes next will be of biblical magnitude.

September 2016:

Friday, September 4, 2020

It Was A Bad Week For Disney Markets

...and the Mickey Mouse Club that believes in them...

For those who ask why I'm always bearish, it's simply because I'm not a true believer in Disney markets. Watching a generation pin their hopes and dreams on a central bank pump and dump never captured my enthusiasm. When Trump took over management of the Casino, I became quite a bit more skeptical. With his perfect track record for casino implosion, I figured he would be successful in imploding this one as well. Historians will never understand why anyone trusted a well known con man. The GOP will soon be recruiting Bernie Madoff for 2024...

Here we see that each fraudulent rally has been powered by more Trump bullshit and more Fed dopium than the last. Each pump and dump leading to a more vicious and out-of-control crash than the last. It's only a matter of time before they get it right.

This summer marked the pinnacle for manipulating markets to a chasmic divergence with economic reality. What I call Disney markets, 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"

What I also call, the Jedi Mind Trick for weak minded dumbfucks.

Record central bank liquidity injections, debt-funded tax cuts for the ultra-wealthy, stock buybacks to hide earnings decline and economic collapse - all widely embraced methods of manipulating markets away from the economy. Overnight we learned the identity of the gambling "whale" behind the massive Tech stock pump and dump:

“SoftBank is the ‘Nasdaq whale’ that has bought billions of dollars’ worth of US equity derivatives in a move that stoked the fevered rally in big tech stocks"

"Call option activity in the Nasdaq’s most popular stocks—the FAANG stocks plus Microsoft and Tesla —peaked at about 13 million contracts on Aug 21. That’s up almost 300% from a month ago"

This is all very deja vu of February except on a 10x scale. Recall this Bloomberg article from late February:

February 26th, 2020:

"Members of r/WSB believe they’ve discovered a kind of perpetual motion machine in the interplay of stocks with options contract...A favorite tactic on r/WSB 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—supposedly. As the stock price rises, so does the value of the calls, often by far more."

Recall that this past month was the biggest monthly rise for "stocks" in August since 1984. Here we see that the best month in 36 years was vapourized in just two days this week:

Below we see via the S&P 500, similarities to the February COVID crack high. Back then as now, the market peaked on Wednesday and rolled over hard Thursday and Friday. On Monday (Feb. 24th) it surprise gapped below the 50 day moving average, exploded through the 200 day (red line) and short-term bottomed at the end of the week on Friday. The first leg down was -16% and lasted seven trading days. 

If the sequence repeats, there will be a gap 'n crap below the 50 day on Tuesday. Followed by massively stained underwear. If my hypothesis is true, I highly doubt this leg down will end at -16%, especially given the fact that trading will begin Tuesday this time. A hard break below the February high (horizontal blue line) will make the August melt-up human history's biggest bull trap. I further predict that all of those still open gaps (green arrows) that are compliments of Fed overdose, will get filled sooner rather than later. 

After two days of Tech carnage this week, today's pundits are now calling for a "correction" in stocks. However, as I have pointed out, the Nasdaq is overbought to the point that even a routine tag back to the 200 day moving average would exceed -20%. Which means that today's correction would be synonymous with a bear market. At least on the all-important Nasdaq.

There have been seven touch backs to the 200 dma in the past three years. Only a hyper-denialist would assume that this record overbought market will be the exception.

Notice the two day volume (circled):

Here we see that Momentum Tech blew through the 50 day moving average (blue) today, but then bounced back late in the day to camp at key support. The order of the day was "BTFD".

Making for a good cliffhanger for the long weekend:

Here we see the 1.5x leveraged volatility ETF was rejected at the 200 dma today on massive volume. However, the same pattern was evident in February - when the 200 day was breached all hell broke loose. Volume this time is much higher, however that may be because the competitor ETF (TVIX) was retired. 

By no coincidence, the two stocks that had to finish green today did. However, after the close Standard & Poor's announced that Tesla was not added to the index. We will see how that plays out next week, as the stock got clubbed after hours. 

There has been massive technical damage beneath the surface of the major indices. Most momentum stocks are now broken. Here we see that breadth and new highs (lower pane) are very similar to the February breakdown:

In summary, according to today's pundits, what we have is a routine correction, aka. a bear market.

However, the inconvenient truth is that the GLOBAL bull market ended in 2018 and this has just been one long topping process.

Each rally powered by more Trump bullshit and more Fed dopium than the last. Each pump and dump leading to a more vicious and out-of-control crash than the last.

Thursday, September 3, 2020

MOAC: Mother Of All Crashes

A super cycle options driven melt-up ahead of a long weekend. What could go wrong?

This could be a very expensive Labor Day indeed...

We are witnessing a confluence of the greatest market risks of our lifetime taking place at the end of COVID summer 2020.

First off, market liquidity has collapsed as is typical of this time of year. By Friday afternoon most professional traders will be gone for the last weekend of summer. Several brokerages were offline for part of Monday even though it was a generally uneventful day from an index perspective. Pundits are blaming it on the stock splits of the two mega bubbles - Apple and Tesla. As many of us have predicted, we now face a situation in which a handful of Tech stocks are now controlling the entire market due to ludicrous amounts of dollar volume. While the rest of the market has been stalled for months. 

"Online brokerage platforms at TD Ameritrade, Charles Schwab SCHW, E*TRADE, Vanguard and Robinhood were all down or sluggish for hours Aug. 31. The same thing happened during the stock market meltdown in February and March. This is now obviously a recurring problem that should have you concerned if you lack access to professional trading platforms that don’t have similar problems"

I can assure you that what is coming will crash even professional trading platforms. For my part, I am ensuring that my strategies do not have any options expiring next week. I am also taking pre-emptive positions so that I won't be required to trade through a meltdown. As always, cash is king.

As I write Thursday late morning, the so-called gamma hedging that created this past two week melt-up appears to be unwinding ahead of weekly options expiration. If so, then the hangover will build steadily between now and early next week. Meaning Tuesday due to the long weekend. 

Here we see the five day call/put ratio making a second lower high with Nasdaq new highs also putting in a second lower high (lower pane). Both deja vu of February:

As far as I know, only U.S. and Canadian markets are closed on Monday. Which will put Asia and Europe two trading sessions ahead by Tuesday in North America. Again, short term predictions are a fool's errand, nevertheless risks are too great to ignore this situation.

The risks have been building steadily into this momentous event.

Liquidity collapse
Over-leveraged positioning
Massive short covering
Options driven melt-up
Breadth collapse
Mass complacency
Economic obliteration

Also on Thursday morning it appears that the Tech bubble is rolling over hard. Tesla is down for the second day in a row. Large cap Tech is getting monkey hammered.

Buckle up

Wednesday, September 2, 2020

The Trump Dump

What dunce comes out at the peak of an out-of-control liquidity driven super bubble during the worst economy since 1930 and claims full credit for human history's biggest con job?

When at first you don't succeed:

The number one thing that Trump supporters constantly forget when they make their carefully contorted historically asinine arguments in his defense, is that he's an idiot. Therefore sadly no amount of regurgitated Faux News pablum for weak minded dunces is going to overcome that fact.

On the other side of this meltdown, Trump apologists will do everything possible to pin the blame for this debacle on the Federal Reserve, however it was Trump who hand picked Republican Jerome Powell to Fed Chief. It was Trump who complained constantly about rate hikes. Trump who cut taxes and lubricated markets in 2018 until they crashed. Trump who used the trade war to manipulate Fed policy. Trump who ran the largest post-war deficit in U.S. history forcing the Fed to monetize the resulting repo liquidity crisis. And Trump who STILL has his base of morons convinced that he is their economic saviour. Continually talking about a v-shaped recovery, while the economy implodes in real-time.

Today's vertical robo market rally was ludicrous. An indication that this Disney market is TOTALLY out of control. The options/derivative is now wagging the dog as this Icarus rally reaches its pinnacle. Anyone with even half a brain would run the other way instead of wanting ANY credit for this latent disaster.

This Bloomberg article explains the underlying dynamics driving this lethal melt-up; however, as I've explained it's gamblers renting capital via the options market that is driving the casino into a momentum feedback loop. Out of the money calls force more market maker buying as the market moves higher.

"Strong demand for bullish derivatives on the biggest tech names has spurred dealers to bid up both stocks and their implied volatility indexes...This happened as overall volume declined on the New York Stock Exchange, pushing speculative trading as a share of overall turnover “through the roof”

When shares fall, market makers are likely to unwind hedges at an increasing speed, spurring more losses"

Here we see that this volatility vortex has dragged the S&P 500 to multi-year overbought - worse than the 2018 VixPlosion. We also see that the implied volatility futures are rising with the market:

According to that same article, one observer points out that the volatility bid is not coming just from bulltards. It's coming from real money betting on a major crash:

"This latest bid to implied vol has not come exclusively from the call side; we’ve seen a material increase in hedging demand over the past two weeks”

Despite this robo rally which has seen the S&P 500 up 9 of the past 10 days, the majority of the market ex-Tech STILL has not confirmed the S&P 500 new high. Including the all-important Dow Industrials, Dow Transports, Russell 2000, and global stocks.

Here we see that today the equal weight S&P 500 finally took out the June 10th high, and spiked into the open gap from February 24th. However, we also see bond yields rolling over hard.

An indication that the fake reflation rally is running on glue fumes and non-stop Twitter bullshit.

It's clear that a lot of today's gamblers were not around in March 2000 when the Nasdaq exploded at all time highs. It was spectacular.

When Tsar Bomba explodes the same way this time, these are the safe havens  (Utilities, Consumer Staples) that money will rotate into - the stocks that have the clearest third wave (down) pattern:

In summary, I suggest that this long overdue revelation of Trump's true moral character, is not going to help Trump's popularity among his devoted base of true believers.

At least the wealthy ones I know who are about to get wiped off the map financially. 

Only a gifted con man could pull this off

Tuesday, September 1, 2020

Waiting For This MAGA Circle Jerk To Explode

MAGA is without question the most over-lubricated circle jerk in human history...

These are by far the most bizarre and insane times in my 52 year lifetime. Those people who are going on with their lives in the normal fashion are the ones who have gone truly insane. Now we see how important consistent belief, routine, and habits are to human sanity, no matter how dire the circumstances. Adaptation never enters the picture for most people. Today's ubiquitous consumption zombies have no answers because they have no questions. There is literally ZERO introspection in this society. Non-existent historical perspective. Those of us who question the new norms of insanity are the ones who are deemed on the fringe. People STILL don't understand why I don't believe in this gong show aka. "the system".

Orlov: License To Kill:
"As the endgame approaches, those still nominally in charge of the collapsing empire resort to all sorts of desperate measures—all except one: they will refuse to ever consider the fact that their imperial superpower is at an end, and that they should change their ways accordingly. George Orwell once offered an excellent explanation for this phenomenon: as the imperial end-game approaches, it becomes a matter of imperial self-preservation to breed a special-purpose ruling class—one that is incapable of understanding that the end-game is approaching. Because, you see, if they had an inkling of what's going on, they wouldn't take their jobs seriously enough to keep the game going for as long as possible."

I have questioned this bonfire of the sanities for over a decade straight, during the continual descent into madness. And here we are.

For those who don't remember, The Running Man was a Stephen King book turned movie about a game show host president who used violent spectacle to keep the domestic populace under control.

Sound familiar? Trump is an expert at inciting BOTH the alt-left and alt-right to violent anarchy. The anger of these two camps feeds off each other in an escalating conflagaration heading into this existential election. 

No one with a brain in the Democrat party sees Biden as any type of saviour. There is no question he is not competent to be president. Nevertheless by comparison to Trump he is eminently more qualified. One man has a flagging memory, the other man pollutes and distorts the truth with purposeful deceit. 

No archaeologist/historian looking back on this time from the distant future will understand how Trump got elected the first time much less a second time. Of course he would not be the first aspirational dictator to lead his blindly loyal base straight into the dumpster of history. History is replete with demagogues who preyed on fear and racism in order to gain popularity. The 1930s spawned several well known fascists. They all ended extraordinarily BADLY.

The Republican Party is now the party of Trump. Those former Republicans who won't back Trump, no longer have political affiliation. Those who DO back Trump have overwhelmingly indicated they don't give a damn about democracy or American institutions. To them, their Trumptopian fantasy is all that matters.

Of course if Biden wins he will be saddled with one hell of a mess, because MAGA is nothing more than a four year (?) delusional orgy of greed and profligacy on a biblical scale. An exorbitant vacation from responsibility tacked onto the end of the economic cycle. Which will end with human history's biggest financial explosion. 

The one we are expecting any moment now.

Anyway, that's what history will say about this time. It was just one massively lubricated circle jerk. 

Let's get to some ludicrous charts:

The parabolic stock du jour is Zoom Video which more than any other company epitomizes the work from home mega bubble. Last night this stock "beat" earnings expectations and today tacked on +40% to its parabolic COVID rally:

Yesterday I wrote about the Tesla mega bubble while mentioning Apple briefly. Today, the Apple mega bubble exceeded the entire Russell 2000 small cap index in market cap.

Apple is now record overbought (see top pane) and is of course the prime beneficiary of dumb money index inflows AND algorithmic futures-based market manipulation.

Software sector

Momentum Tech

Here we see Chinese internet stocks overlaid with U.S. Momo Tech. 

The fate of the U.S. and Chinese casinos is now inextricably bound. What Donny does to China will ricochet back on U.S. markets. 

As I've said many times, there is only one reason for this pump and dump - to mine the bank accounts of those idiots buying a Tech bubble during a depression:

On the topic of Running Man, gun sales are through the roof:

Trump is set to join the pantheon of GOP presidents who over-lubricated gamblers with de-regulated corruption and easy money: