Sunday, April 22, 2018

Reversal Of Fortune aka. Shanghai Surprise

This past week's failed Syria "mission accomplished" rally marked the third failed retest of the 50 day. So far, the Nasdaq pattern is identical to Y2K. Millenials have an excuse not to see this coming, no one else does...

Either commodities continue to lead the RISK ON rally thereby imploding consumers via higher gasoline prices, or commodities roll over immediately thus imploding record-leveraged gamblers sooner rather than later. Either way, denialists are between a rock and a hard place...

As NorthmanTrader points out, the Nasdaq (100) is so far identical to Y2K. The market peaked in March 2000, carved a right shoulder in April and then imploded lower at the end of April into May.

In today's case, it's a very weak right shoulder. Needless to say, commodity rallies and rising interest rates are not helping growth stocks. 

Nasdaq breadth peaked at the January high, which was a major divergence since the Nasdaq 100 peaked in February. Meaning that fewer and fewer stocks are holding up this charade. 

Here we see the ratio of large cap internet versus semiconductors which got pole axed this past week:

Broadening to the S&P 500, I've been saying all along that this was a massive test of the 200 day, however, it was really failure at the 50 day. The 50 day has been tested eight times in the past three months, from both sides.

Last Monday, the casino gapped up after the "mission accomplished" in Syria, rallying through Wednesday, but gave it all back at the end of the week. Meaning that a North Korea rally could back-test the 50 day one more time...

Ironically, gamblers were exhorted to buy this latest dip off of the 200 day ahead of record corporate earnings generated by the tax cut. There's only one problem:

ZH: Corporate Buybacks Won't Return For Weeks

The strong corporate numbers are hardly a a result of Trump's tax reform and rising oil prices, Wall Street has been expecting blowout numbers..."

"April is one of the weakest months for the buyback basket"

The incessant selling by institutions during this last rally is highly evident:

Unlike the S&P 500, China Tech, which is cross-listed on U.S. exchanges, is already back below the 200 day.

Meaning that Shanghai Surprise is indeed very close at hand. 

Just as Chinese small caps were the canary in the coalmine for global risk off in 2015, in this era, Bitcoin was the warning that the risk cycle is ending:

Deja vu of Y2K, today's gamblers don't know a bear market when they see one.

April 19th, Etrade First Quarter Results

Daily Average Revenue Trades (DARTs) of 309,000, a Company record, including derivative DARTs of 98,000, a Company record

Customer margin balances of $10.5 billion, a Company record

Net new brokerage accounts of 60,000

Net new brokerage assets of $5.3 billion, a Company record