This is the point in the cycle when Wall Street earnings projections have the veracity of a Magic 8 ball. All of this year's stock market return was due to "multiple expansion", meaning gamblers bidding up their own assets while pretending to be wealthy. Record stock buybacks for two years in a row and yet the S&P is at the same level it was at a year ago. There are no value buyers at these levels because stocks have been bid to insane valuations while balance sheets have deteriorated:
"Payout ratios are elevated, cash balances have declined and leverage has risen to a new all-time high,"
all of that borrowing could backfire if the economy stumbles"
Oil will be the next big shoe to drop, as WTI crude is now in a bear market, and yet oil gamblers walked into this week still solidly net long crude futures:
Oil did not partake in today's dead cat bounce
New weekly low for frackers. Junk bonds are not far behind:
Likewise, Treasury shorts - betting on reflation - have been getting annihilated. Again, t-bonds did not confirm today's rally as yields sank further:
Volatility traders also caught off guard this month. As the VIX was up 100% at yesterday's high:
But the real test for these markets will be the momentum names and whether or not they stop at the 200 day or keep rolling through it. Volume is heavy on the weekly and it's only Tuesday:
8% to go
Reality is a long way down
