Thursday, April 5, 2018

The Kudlow Rally

It's fitting that they would get buried by a Supply Side con man. Shorts pressed the 200 day Maginot Line, and got fed a load of bullshit from Kudlow instead...

Bulls have expended tremendous ammo and even more bullshit to go nowhere for two weeks four months straight. Not that anyone could tell from the headlines.  

The battle of the 200 day has lasted two months since early February. Deja vu of 2015:

Zooming in for a close-up, the recent retest of the 200 day moving average has now entered its ninth day. Skynet desperately wants to close those open gaps above, however it's testament to the weakness in today's casino that the gaps from February were never closed, so it's not clear that these will be covered either. 

Best guess from an Elliott Wave standpoint, I would say this is an extremely weak "running flat" corrective wave: 

Lending credence to this theory, here we see the running flat applied to current "leadership" from recession stocks. This interpretation makes the entire past nine trading days, corrective. What makes it a "running flat" is that normally the 'b' wave isn't supposed to go all the way back down to the origin of the rally. This only happens in really weak markets. 

Leading the bounce back from the brink are Facebook and Amazon, compliments of short sellers booking recent profits:

"Short-sellers who placed bets that the shares of four big tech leaders, known as the FANG group, as spelled out by their first initials, were due for a fall have made more than $4 billion in profits over the last two weeks"

Putting one and one together, we see that Tech short-covering and Utilities "leadership" are converging from opposite directions. Normally uncorrelated, they are strangely correlated now, compliments of the futures-driven faux rally. 

The derivatives tail is wagging the dog with assistance from short-sellers. There are no real buyers anymore. Which is why realized volatility is so high. There is a trap door under the casino. 

Oil just tagged the uptrend line one more time. 

Yields are enjoying a mild retracement

World leaders are corrective off of the 200 day:

China tech tagged the lower support line:

Of course if my interpretation is correct, consider what comes next.

The terms "safe haven" and "low volatility" will be finally put to rest. 

"In Kudlow we trust"