The casino is setting up deja vu of 2015, with a few differences:
First, the cycle is three years older and interest rates are higher now. Secondly, there is a global trade war underway. Third, defensive stocks have already rolled over. Fourth, the Fed is rolling off their balance sheet. Fifth volatility is already elevated, due to February VolPlosion. Sixth, there is far more leveraged capital at risk now due to far greater complacency. Seventh Wall Street is dumping IPOs at the fastest rate since Y2K.
Despite yeoman effort, today was a rare down Wednesday in the casino. Which means that Skynet is ceding control to Netflix margin calls. Which leaves the S&P looking identical to where it was in March, except 80 points closer to the next stop, 200 day.
The Dow is in an even dicier position, clinging to the 200 day, having tested it several times this week:
Likewise, Transports are poised at the 200 day, meaning Dow Theory sell signal is imminent for the first time since 2016. Which when triggered, will usher significant capital to the exits...
EM Credit new low today:
Emerging Market stocks deja vu
“People have long thought the U.S. economy will eventually hit a recession at some point. But there are growing worries Trump’s trade policies may hasten that. The fear now is that ‘America First’ may become ‘America Worst’”
“This rolling EM meltdown is another expression of the ‘QE to QT’ reality, as the easy carry environment of the post-global financial crisis period is now coming home to roost”
ZH: Largest Month-End QT Portends Selloff
"Monday July 2nd spooz should trade heavy if this QT theory holds true"
“People have long thought the U.S. economy will eventually hit a recession at some point. But there are growing worries Trump’s trade policies may hasten that. The fear now is that ‘America First’ may become ‘America Worst’”
“This rolling EM meltdown is another expression of the ‘QE to QT’ reality, as the easy carry environment of the post-global financial crisis period is now coming home to roost”
ZH: Largest Month-End QT Portends Selloff
"Monday July 2nd spooz should trade heavy if this QT theory holds true"
"Investors and policy makers have been closely monitoring the shape of the curve because they’ve been on guard for it to invert, a shift that has historically preceded recessions. Yet despite the growing focus, so far the Fed hasn’t altered its normalization plans. This month, it boosted its outlook to four total interest rate increases in 2018 from the three it envisaged in March."
The Fed is ignoring the bond market, because they're wrong again. And again. And again.
Bond bears wrong again. And again. And again...
"The IPO Calendar is on fire as Wall Street wraps up the first six months of 2018. For the final week of June, bankers expect to price 16 IPOs to raise $2.83 billion. That’s a lot of traffic."
If all 16 IPOs get out the door this week, it will increase June 2018’s total to 37 deals. You would have to flip back to June 2000 for heavier June IPO traffic"
For those who were around in June 2000, the Nasdaq had already rolled over, as it is now. Wall Street was dumping into a down market.
Any questions?
This year's largest IPO
Dropped Box (red)
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