Monday, April 16, 2018

A Deep State of Denial aka. The Inconvenient Truth

Proven idiots are not in denial about global warming, they're in denial about EVERYTHING...

The deep state visualized:

"All forward decks are now open for swimming"

Trump's "Mission Accomplished" rally has bid the casino for the present moment, as the battle for the 200 day Maginot Line enters its fourth week.

Unfortunately, Wall Street couldn't be bothered to update their linearly-extrapolated forward profit models based on the latest data, despite requiring only that they add a minus sign. So instead they went back to their Magic 8 ball and decided the data is wrong, therefore it's time to buy high risk stocks. As if the delusional bulls needed any more encouragement. 

It's a testament to the current level of denial that today's bulls have decided that a multi-decade super cycle top, is actually a correction level bottom.

ZH: This Can't Be The Top, So It Must Be A Bottom

"Because if this was the top, we would all look like a bunch of idiots"

Of course there were no facts or data to back up this assertion - just a big fucking moron broadcasting his own delusional opinion. Which is convenient because it's hard for me to refute something that doesn't even exist. Which is how this society operates by the way. 

Putting my dunce cap on for a moment, we can see how they arrived at this opinion. Sort of...

Here we see the medium-term S&P view:
The January rally was smooth and silky. The February rally was a bit choppy. And this latest delusion is an overlapping mess. Nevertheless, the casino just tagged break-even for the year, which happens to be the 50 day moving average (blue line).

As we see in the lower pane, large cap breadth is only now back to where it was at the February low. And ominously, selling volume is rising in lockstep with the trend-line.

It's on the three year chart where the real delusion comes into play. Bulls such as the one cited above, seem to believe that this decline was a repeat of the late "mid-cycle" correction circa August 2015, which is to the far left. Timewise it's about the same duration, however, as we see, technically this current pattern has far more in common with the late 2015 top. 

The fact that by August this will be the longest bull market on U.S. record plays no part in any of this of course...

So the technicals and the fundamentals both line up with a deflationary decline, but compliments of obligatory mass denial, gamblers are now also doing battle with the Fed as well.

"Don't fight the Fed, much"

NYSE breadth momentum is more overbought now than it was at the top, while sporting an identical divergence:

And of course banks confirmed on Friday that the tax cut for the ultra-wealthy went to the ultra-wealthy.

Go figure.

Here is where it gets interesting. Last week I said that end-of-cycle short-covering was a key factor driving this market. Skynet knows that the only buyers are above the market.

"Leadership" currently consists of left-for-dead retail stocks, such as Macy's. Here we see that beginning in 2016, a massive divergence emerged between consumer sentiment (black) and the travails of bricks-and-mortar retail. One that we didn't see during the last cycle.

In other words, sentiment has diverged historically massively from economic reality. Yet another testament to the powers of mega bullshit:

(Delayed) hedging is also following the script from the January top:

The animal spirits have been duly tapped

And the short-covering, volatility squeeze is heading in the same direction. At least for the five of us who still believe in reality.

Which means that this is either the last chance to buy, or it's the last chance to sell i.e. the exact opposite of what every fool believes right now. 

Which is how this society operates by the way.

In summary, denialists can't afford for this count to be right