Friday, December 9, 2016

Blow-Off Top In The False Profit Rally

"The incoming administration is also expected to roll back some of the regulations imposed on banks after the financial crisis."

This is the perfect way to end an eight year vacation from responsibility - with a degenerate Idiocracy betting it all on the people who bankrupted them...

You see, people think that there's money in the stock market. So whenever they sell, money is coming out of an account "somewhere". However, there is NO money in the stock market. All there is (or not) is someone else on the other side of the trade who may or may not be willing to pay the last price that was quoted for "stocks". Hence there is no guarantee that the prices which obtain in a manic melt-up blow-off top, will obtain in the other direction...

Furthermore, the trend for two months now has been towards strong opens and weak closes, indicating money outflow:

Which means that daily money flow is lagging this rally:

The last momentum trade:
Again we are reminded that Financials now comprise almost the entire bulk of market cap gains from this Trump corruption rally...

Here we see the Financial sector versus the average S&P stock (which includes Financials so it's even weaker than this)

Last year, Financials peaked this exact week along with interest rates, ahead of the Fed rate hike, next week:

All very exciting...

As indicated below stock market valuations are near record highs, but that's not the real problem. The real problem is that Fiscal and Monetary policy are still at historical extremes. Interest rates are at .25%. Capacity utilization and employment participation is at recession levels. And profits as a % of GDP are at 1929 levels. 

In other words, asinine valuations are just the last straw on top of the Potemkin status quo...

"Good news, Trump is taking us back to the 1950s"

"It is a common saying that smart money is out of market in such formation and market is out of control"

Weekly money flow