"What Stocks Do I Buy In A Blow-Off Top?"

"Who will tell me when to get out. Mark Cuban?"

Ten years since the last market peak, and what have zombies learned? Absolutely fuck all...

"There’s no other way to say this: The market is in full melt-up mode. Everyday feels the same, a low volume/low volatility surge with minimal fuss or drama. Is this what heaven feels like?"

"This bull market has repeatedly shown that bad breadth numbers are just another oddity to be ignored"

"Are you thinking about General Electric Company. Bad idea"

#1 Stocks to Buy: Netflix (NFLX)

ZH: Today Marks The 10th Anniversary Of the 2007 Cycle Peak

Coincidentally, also today:
ZH: The Blow-off Top: Gamblers Just Added The Most Exposure Since 2007

Picking Up Nickels In Front Of Depression

No one has informed the Idiocracy that the impossible is not possible...

Contrary to popular belief, raising interest rates at the end of the cycle is not "reflationary". The amnesiac casino class have diligently forgotten that fact. They also seem to forget that the middle class was outsourced for special dividends, hence economic reflation under the current paradigm is totally impossible. But since it wasn't them who went under the bus, they are wholly oblivious to these salient facts...

This, and Trump's imaginary tax cut, are what has been driving the melt-up:

Following Friday's shockingly bad jobs report, which produced -33,000 jobs versus +90,000 as expected, rate hike expectations went UP. Yes, you read that right. December rate hike expectations are now at 91.7%. Why? Because wages saw a minor uptick which is not allowed per Supply-Side Ponzinomics, as that will negatively impact quarterly profits. 

Now when I say that these people are fucking retards, I don't say that lightly. They are hardcore Idiocracy:

Getting back to the article above:

"Buying bank stocks two months before a December rate hike worked every time since 1990, as investors consistently bet on the industry to get a year-end profit boost from the Federal Reserve's move"

Wall Street gets a year-end profit boost, everyone goes home happy, what could go wrong?

First off, December rate hikes have only occurred four times since 1990, rendering the "banks always do this 100% of the time" claim specious at best.

By chance the last one was 2015, offering interesting comparison. Here we see short-term rates (red) with regional banks (black). Two years ago in September following the China devaluation, the Fed backtracked on December rate hikes due to "global turmoil". Wall Street was pissed since they had the (bank) reflation trade on in size. So Fed mandarins 180'd in October and put not one but two rate hikes back on the table, leading to a .50% vertical rally in short-term rates to catch up to banks. Banks had been rallying the whole time since Wall Street had the Fed on speed dial.

This time however, until September, banks had been diverging from FedTrumptopia. Why is that?

It's because banks are following long-term bonds not the Fed:

Short-term rates with long-term t-bond yields (black)

The long bond knows what Fed rate hikes are doing to auto loans, mortgages, credit cards, student loans, home equity loans etc. etc. 

But the Fed knows best, right?

As we know, Fed policy calls for raising rates until something breaks. In 2015, they imploded the Chinese Yuan and Emerging Markets. So far, a repeat hasn't happened during 2017 because of the massive inflows to Emerging Market stocks.

Deja Vu of 2015 however, the Fed is beginning to take their toll on EM currencies (black):

This divergence is coming at a time when EM stocks are back at three year highs, and S&P volatility is back at all time lows:

On Friday, the highest flying financials reversed hard

Fortunately, gamblers and their serial clueless Fed are between 91.7% and 100% confident this is only temporary:

No one has informed the psycho-class that what they assiduously believe in is impossible. And they're the fucking morons who made it so...

Don't try this again at home:

Off-topic, I don't see BitCon making a new high, although I seem to be in the minority as usual:

ZH: Mark Cuban Highly Endorses BitCon
“...it's interesting because I think there are a lot of assets that have values based on just supply and demand. You know, most stocks, they don't have any intrinsic value, no true ownership rights, no voting rights, you just have the ability to buy and sell those stocks. They're like baseball cards and I think Bitcoin is the same thing...”

Any questions?

Trump Is The New Herbert Hoover

Republican businessman Herbert Hoover, was elected in 1929 amid record U.S. wealth inequality, and a stock market that was already in a big, fat, ugly bubble. Nevertheless, salivating at his business-friendly platform, the stock market went straight up, overheated, and then crashed in October that same year...

Deja Vu of 1929, today's volatility sellers are betting that stocks have reached a new permanently high plateau. The average intra-year drop for the S&P 500 is 14%. That's no longer an option. In other words, a decline of the magnitude seen in 2014, 2015, and 2016 will now implode the casino...

For his part, Trump plays the role of the business-friendly president, embracing any and every policy that throws the middle class under the bus. The faux is in the hen house:

"I think things are just fine the way they are"


Trump's off-hours role is herding sheeple towards the cliff:

And starting wars on Twitter

Back to the permanent plateau:
Volatility shorts have not been forced to cover since Brexit. The largest decline in the past year was -5%, right before the election. Hence over-confident volatility sellers have massively increased their bets on continuing low volatility even as the casino has reached ever-higher (over) valuations.

In doing so, they've increased the sensitivity of the volatility complex to small moves in the S&P 500. A large percentage move in the S&P 500 will now implode the inverse VIX ETFs:

Second derivative volatility as a ratio of the VIX is record bid due to the massive volatility short position:

Furthermore, for the past year, by increasing their short volatility positions on every market selloff, they've been actively suppressing market volatility.  They've not been forced to unwind their positions. Yet. 

Why? Because they've been constantly bailed out by the BTFD team, most recently in September. Whereas every other decline in the Nasdaq saw a spike in selling, the September dip saw only heavy buying:

Here is where it gets interesting...

Volatility sellers only control the VIX futures, they don't control the spot VIX itself, which is derived from implied volatility of S&P 500 front-month options. Hence in the event of a larger selloff, these vol sellers will be trapped by backwardation. Meaning the VIX will spike above the artificially suppressed futures. 

When that happens, vol sellers will become vol buyers and they will force massive short-covering across the volatility complex, which in turn will drive selling of the S&P 500 futures. Which will drive more buying of volatility futures etc. etc. 

Say for example, because the Nasdaq rolls over again:

Or because EM stocks go RISK OFF again

Or because it's the end of the cycle again and gamblers are over-exposed to the fake reflation trade:

Or, it's just that time again

Or, because the Fed is rolling off their balance sheet for the first time since 2011:

The key point is, the proximate reason for selloff no longer matters. Trees don't grow to the sky and those who are betting that markets will never fall ever again, are going to learn that lesson the hard way.

September FOMC:
"In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans"

"I Bought For The Tax Cut, But I Stayed For The War"

After all, war has a higher economic multiplier...

One of the side effects of the post-2008 bailout of ponzi capitalism is that from that point forward, everything had to be fake. Most people never noticed the difference...

Fake news
Fake recovery
Fake reflation
Fake tax cut

Fake president

Now we know what the reality-tv-show-host-in-chief was alluding to with last night's episode cliffhanger:

Also just in:

"The lousy returns from the September jobs report will make little impression on observers, who essentially gave the labor market a free pass due to the impact of Hurricanes Harvey and Irma,"

"2017 thus far has seen the slowest jobs growth in at least five years"

"This job market is strong and will get stronger"

"Fear not, it's only weather"

More fake reflation news:

Island reversal of fortune visualized: 
Goodbye Gundlach trade, goodbye dollar, goodbye fake reflation

Here comes the bond short squeeze:

Speaking of fake reflation, Navistar trucks was upgraded this morning:

Headfake reflation is exhibited at the end of every cycle as bottlenecks develop in key areas of the economy, even as overall underemployment and over-capacity persists. Businesses complain that they can't find key skills even as they're laying off out the other door.

Fifth wave blow-offs are evident across many industries:

The Calm Before The Shitting Of Bricks

Forrest Trump is discussing Keynesian stimulus options with the Pentagon tonight...

"What storm?"

"You'll find out"


Speaking of shitting bricks, no dotard has seen this before...

"This time with feeling"

The Keynesian defense stocks are mildly overbought after a year of pounding the war drum:

Big Cap Tech (Nasdaq 100) finally made a new high today, amid record divergences:

Unfortunately, the fake reflation trade has monkey hammered the deflation trade, hence it's back to bonds when Ameritrade gets sold...

You know the drill

Fifth wave blow-off top

Compliments of money printing, the secret to effortless wealth: