Monday, January 18, 2016

JPMorgan: "This Can't Be 2008. So Buy The Dip"

"The small investor is always wrong"

Wall Street is betting that the small investor is wrong again (too bearish). If team Groupthink, who covered on Friday at the speed of a group Instant Message, is wrong instead, then they're about to get shellacked...

ZH: Jan. 18, 2016
Small Investor Sentiment Says Market Should Bounce NOW

The article is all wishful data mining. There have been 40 times since 1987 when sentiment (bull-bear spread) was more negative than it was on Friday. At the bottom in 2009, the spread was almost twice as large (-51%) as it was on Friday (-27%). The bullish % indicator on Friday, however WAS the lowest since 2005 which preceded a rally. It's to be left to the reader to decide if risks today are the same as 2005. 

As I just showed, in this sell-off there has been no spike in volume, no selling urgency and no VIX spike to confirm the bearish sentiment. Likewise, if everyone is "so bearish" then why is hedging lower than it was last June and nowhere near where it has been in the past? 

Wall Street doesn't hedge when the VIX is at 27, because it's "too expensive"...

Index put/call

Clearly a bounce here would be very welcome by trapped bulls, but it would be also be welcome by those bears who have been following JP Morgan's advice to sell every rally, and who covered their shorts on Friday ahead of the long weekend. 

I'm not saying a bounce won't happen, but when all of Wall Street expects it, it may not last very long. And suffice to say that if it doesn't happen, bulls and weak-handed bears are both going to shit a brick.

"The last time the market was this weak was in 2008 just prior to the crash, therefore, according to Idiocratic logic, this is a fantastic buying opportunity" 

Relative Strength Index (RSI):

The other analyst referenced in the article reminded us to:

"Mind the gaps"

These gaps were created by overnight sell-offs in the JP Yen carry trade RISK OFF, which is not going to reverse if, as the exact same analyst believes, Emerging Markets will continue lower...

Mind the gaps Indeed: