Tuesday, April 10, 2018

Short-Covering Ahead Of Collapse

The problem with 2008 was that no one went to jail. This time that is not going to be a problem...

Looking at the casino at any point prior to 3:30pm has become a total waste of time. The algos know that the only remaining buying liquidity is above the market in the form of short-covering, so they've been generating one short-covering rally after another. Each one having the half-life of a rotten banana. Yesterday was a one hundred point round trip to nowhere in the S&P in a matter of a few hours. All very bullish...

Here is where it gets interesting:

As we see, TRIN is rising on the selloffs, as liquidity diminishes after each "rally":

All of these failed rallies have led to massive money outflow, as institutions take advantage of the fake bid to unload:

Another problem for the bulltard case is the fact that Skynet is not just defending the S&P 200 day, the algos are also having to defend the Nasdaq's two year rising trendline:

Further to the subject of short-covering, yesterday CNBS was touting the resurgence of left-for-dead retail stocks now providing "leadership". In other words, tech is well off its highs, financials well off their highs, transports lagging, so now Macy's is "leading":

We've seen this movie before, twice in the past two months. 

Which gets us back to where we are in the cycle. I found this article "interesting":

"Despite tough new regulations aimed at lowering risk for banks, Wall Street continues to find a way to finance subprime loans."
Instead of direct lending, big institutions like Wells Fargo and Citigroup loan money to nonbank institutions — shadow banks — who then deal with higher-risk clients. 

Banks say this way helps lower their exposure."

In other words, a new genre of hedge funds, created post-2008, serve as intermediaries between the large banks and the subprime borrowers. The hedge funds use their newly minted "clean" balance sheets to borrow from the banks at prime rates and then they turn around and lend that same money to subprime borrowers. Of course, this is all just deja vu of the CDO delusion circa 2008.

Holy fuck. There's never been a society dumber and more corrupt than this one. 

Which gets us to the last chart.