Sadly, the truth is the exact opposite of what the Idiocracy has been led to believe...
Next week this becomes the longest bull market in history. It took ten years to finally convince gamblers that this charade can last forever. Unfortunately, final implosion is taking place in real-time. Nothing lies as much as misallocated capital at the end of the cycle.
This week is options expiration - the exact same week the wheels came off the bus in 2015. Overnight, Asia was not happy that China Tech stocks got sold in the U.S. yesterday, so they returned the favour overnight:
Next week this becomes the longest bull market in history. It took ten years to finally convince gamblers that this charade can last forever. Unfortunately, final implosion is taking place in real-time. Nothing lies as much as misallocated capital at the end of the cycle.
This week is options expiration - the exact same week the wheels came off the bus in 2015. Overnight, Asia was not happy that China Tech stocks got sold in the U.S. yesterday, so they returned the favour overnight:
Back in 2015, China was devaluing their currency, the Fed was tightening, Emerging Markets were in chaos, commodities were collapsing, market breadth was weak, Tech was in blow-off mode, gamblers were complacent. The very same conditions abide this time around, with a trade war added in for good measure. Also, neither the vol short trade nor the bond short trade were on in size three years ago. Meaning that today's speculators are actively betting against collapse.
This correction is similar to the one that took place after the May 2015 high, however, this one is a "double zig zag". Both are/were choppy counter-trend moves as indicated by breadth:
Ten years ago when this bull market started you couldn't give away stocks, and now today's speculators are betting that the longest bull market in history is just getting started:
Denial is rampant, globally:
The devaluation in the Yuan this time around makes 2015's devaluation look miniscule by comparison:
"Fortunately, this is not free fall"
Another risk that wasn't nearly as acute in 2015 was the Tech mania risk. The crowding into a handful of mega cap Tech stocks - now led by Apple and Amazon - makes this the narrowest market in history:
Whereas Yellen backed off of tightening in 2015 as Emerging Markets began crashing, this Fed has made it clear they don't care.
It was the Fed's May meeting that monkey hammered Emerging Markets as they signaled further rate hikes for 2018.
Not to mention the fact that Powell made it clear that Emerging Markets are going under the bus...
Not to mention the fact that Powell made it clear that Emerging Markets are going under the bus...
Trump is doing his fair share to monkey hammer Emerging Markets:
"WASHINGTON—President Trump’s decision to double steel tariffs on Turkey as its government battled a currency collapse marked a departure for the U.S. from how it traditionally handles financial turmoil hitting emerging markets.
Washington has generally tried to calm global markets in such moments, especially when investors are gripped by fear of contagion. Mr. Trump instead squeezed Ankara further"
In other words, it's a team effort...
I see shared sacrifice coming sooner rather than later...
Gamblers who assume that the Fed can save them again, don't fully understand how much capital has been misallocated to reflationary bullshit. Fed reversal will only accelerate risk unwind...
