Wednesday, July 25, 2018

VolPlosion 2.0: Make Alzheimer's Great Again

Six months later, the S&P 500 finally filled the last open gap from VolPlosion 1.0, amid a confluence of risks identical to February, yet 10x greater. In other words, it's new all time lies all around...

But first, this last gasp rally was compliments of a "trade deal" with Europe on automobiles. The only U.S. sector not rallying is automobiles, which have been clubbed by trade wars:

Tech earnings and Central Bank meetings

Deja vu of Q4 earnings AND Q1 earnings:

Ironically, U.S. automakers are NOT partaking in this latent rally which is led by internet stocks, the known safe haven from trade wars. 

"The biggest U.S. car manufacturer GM, -0.03% slashed guidance for 2018 because of worries that commodity-price pressures would weigh on it for the rest of the year. GM said the costs of steel and aluminum were way above what it was expecting at the start of the year, pushed up by the tariffs on imports that the Trump administration announced in March."

GM shares were down 7.3% in midday trading, dragging rival Ford lower, as well."

In other words, Trump's victory on autos with Europe is more than cancelled out by higher commodity costs. Meanwhile, the increased competition for autos is a net negative for Europe.

Any questions?

This is where it gets interesting.

Way back on April 10th Mark Zuckerberg was hauled in front of Congress to explain why his platform was so effective at rigging elections. During that testimony he announced that Facebook was going to "make changes" to put people ahead of profits. The stock tanked. Soon after, Jeff Gundlach announced he was short Facebook. Yet when Q1 was reported on April 25th, and there had been no impact to profits and revenue, the stock bolted higher.

Making a new all time high. Today. 

It turns out that Gundlach wasn't wrong, he was just early, because after hours ALL of the Q1 rally gains evaporated:

The company's top executives delivered a few scary warnings:
Revenue deceleration
Weaker margins
Effects of privacy changes

Of course we already know which stocks were holding up the entire Nasdaq/S&P 500:

"Investors did not see this coming. The Nasdaq Composite Index hit a record during trading Wednesday as investors crowded back into the FANG names once again"

Facebook’s nightmare guidance will spook tech investors with a near term white knuckle period ahead"

Despite a new all time high in the Nasdaq Composite today, the number of stocks making new 52 week highs, declined (lower pane):

"Investors Alzheimer's patients did not see this coming"