The massively levered gamma trap has kept the major indices artificially pinned at all time highs, while the foundations of the market collapsed. With two weeks until the FOMC meeting, global gamblers are now trapped between the horns of Trump's two election rigging gambits. And yet, they are wholly oblivious to risk because escalating trade war is all part of the "genius" strategy behind re-election:
Re:
ZH: The Genius Behind The Stupidity
"David Rosenberg has deciphered a cunning plan emerging among all this global trade war tension and economic collapse"
Maybe Trump is a genius, after all. What if he finally gets the steep Fed rate cuts he has been demanding? After that, he ends the trade wars, tariffs go to zero, and the stock market surges to new highs -- just in time for the 2020 election!"
MISSION ACCOMPLISHED!
Wall Street's 2008-style "bad news is better news" argument of the day is that any good news might deter the Fed from printing more free money. The secret to effortless wealth.
"2019 has been all about the "disconnect" between stocks and bonds, with the former refusing to roll over despite the latter arguably yelling "recession"."
Of course, the purported "discrepancy" isn't hard to explain. Expectations for central bank easing and the prospect that more monetary accommodation will help avert a downturn have given equities an excuse to ignore any dire warnings from bonds, which have rallied on a worsening global growth outlook, falling inflation expectations and rampant uncertainty"
Meanwhile, gamblers don't fear the trade war, because first off, "the U.S. is winning the trade war", as we are reminded daily by the Propaganda-Dealer-In-Chief. To state anything to the contrary is to be unpatriotic and risk getting shipped back to whatever shit hole you came from. Forced to accept massive lies is the new "freedom".
Secondly, the indices have been pinned to all time highs by algo-driven index alchemy. Beneath the surface however, the stocks driving the indexes to new highs are the sub-sectors least exposed to the trade war. The majority of stocks that ARE affected by trade war have already rolled over. In other words this is more selective reasoning based on large cap index methodology. The passive bubble further concentrating the market.
"The Dow Theory argues a true bullish breakout only occurs when the Dow Jones Industrial Average and the Dow Jones Transportation Average reach new highs simultaneously."
“CSX’s volume performance fell off in June and early July and they do not have visibility to improvement in the near term”
Railroads were the last sub-sector of Transports to roll over.
In 2008 and now.
Short-term, this is the tallest wick on the weekly since you know when:
Confirmed by the Nasdaq
The last time we saw this much concentration risk was at the lows of 2016. However, this time the indices are near the highs of 2019.
"More bad news will prevent a downturn in stocks"
Today after the close:
"Microsoft looks like a calm oasis in the tech storm"
Due to indexing, Microsoft is the most overbought and overowned company in world history
The once "easy to win" trade war has morphed into yet another hubristic overseas quagmire of undefined dimension. The scope of the mission has expanded over time to now include easy to win global domination and long-term technology pre-eminence.
It had to expand, because from a balance of trade perspective, the entire Trump agenda has been an unmitigated disaster:
As it was in Vietnam, Iraq, and Afghanistan, the public is being lied to continuously. Nevertheless, the lies are much appreciated by a Faux News audience desperate to be deceived.
Trump wants to drag this out as long as possible, so voters remember his "victory" when they go to the polls. The way to drag this out, by means of setting conditions that the U.S. knows China will never accept and then blaming China's intransigence when they don't accept them.
Not everyone is easily fooled.
"Since the high-profile talks between Chinese President Xi Jinping and US counterpart Donald Trump at the G20 summit late last month in Osaka, Japan, there has been little sign that the two sides have made any progress towards ending their year-long trade war."
Needless to say, no sane person can argue with all of this illogic. Bears have now been shunted out of existence by bulls crowding our space claiming that every bad data point is the more reason to buy "stocks".
"No one warned me bad news is bad news"
