Sunday, April 3, 2016

Cataclysmic Ending aka. "The Madoff Moment"

"Because there wasn't just one Bernie Madoff, there was a generation of Madoffs, blowing smoke up each others' asses non-stop..."

It's extremely likely that oil will be the trigger that detonates the final implosion...unless overnight carry trades do it first. No lie, these zombies have taken some heavy pounding, but time is not on the side of non-stop delusion and bullshit. Most risk trades peaked over two weeks ago. The only capitulation so far has been by short-sellers...

Oil peaked two weeks ago on March 21st and is now down 13% from the recent highs, unsupported by short-covering.

Yen has diverged from the S&P since February 10th

Junk bonds also peaked two weeks ago (March 21st)

Treasury yields peaked March 11th

Global stocks ex-U.S. peaked March 17th

NYSE Breadth Momentum peaked March 3rd (McClellan Oscillator)

The low volume/volatility regime has been in place since February 19th

"Earnings Revisions: On December 31, the estimated earnings growth rate for Q1 2016 was 0.8%. All ten sectors have lower growth rates today (compared to December 31) due to downward revisions to earnings estimates, led by the Energy sector. "

Zero Liquidity
Profits are collapsing. There's no buyer underneath this market. This is the end game...

The oil ground and pound should accelerate this week. In past months when the front-end of the curve was NOT supported by ETF short-covering, the low was made between the end of the USO ETF rollover window (April 11th), and the Futures rollover date (April 20th), with a bias towards the ETF date. 

Unlike last month which was supported by short-covering, this month the spread between May and June keeps widening. This implies a -4% NAV drawdown for the ETF to be absorbed between April 6th and 11th, the rollover window. 

Finding the spot market visualized
May (front-month) - June

Short-covering is unlikely, because speculative net longs are at a one year high (red line), as shorts have plummeted:

Compared to one year ago, we also see that oil inventories (all time high) are not conducive to an easy landing this month...

Deja vu of last Fall, Energy stocks have been holding up relative to the far...

USO ETF: Deja Vu of last year's failed rally...volume is picking up again, on the downside...

Breadth (NYSE Oscillator) is also where it was at the top last Fall:

I would be remiss in not again reiterating the only thing holding the S&P together...

Wilshire Total Market Index

The Russell 2000 small cap index is weaker than 2008, despite epic short-covering...

How much short-covering?
The NYSE Advance - Decline 25 dma decade highs...