Wednesday, June 5, 2013

The Pump and Dump Gains Momentum

Global risk markets are breaking down, but complacency reigns on Wall Street...

History's Biggest Pump and Dump
It all started with the Bitcoin blowoff, then gold and silver got liquidated, then Utilities got pumped and dumped, then lumber, now the Nikkei. One by one the risk markets are breaking down. The acceleration point will come when the HFT bots are no longer willing to take the other side of the trade and hedge funds trip over each other to get out the same door...

All sectors continue to take punishment, so I will focus on the big movers:

The Nikkei amazingly is both the best and worst performing market of 2013, depending on whether it was bought at the low or the high. It's now approaching bear market (-20%) territory:

Australian All Ordinaries
As predicted, the unwinding of the Japanese Yen-driven carry trades is causing major dislocations. Below, notably evidenced by the Australian All Ordinaries, now having given up almost all year-to-date gains and breaking through the 50DMA (blue line) on the way to the 200DMA (red line):

One of the leading sectors since 2009 broke its 50 DMA today:

Honourable Mention:
Junk bonds are well below their 50DMA, approaching the 200DMA. Facebook is doing another faceplant. Hombuilders, the UK FTSE and Dow Transports all broke their 50DMA decisively today. Solar stocks like SolarCity are down 35% from their highs.

What, Me Worry?
On the complacency side, there was no sign of panic or capitulation. Volume rose slightly, but the Vix did not spike and the put/call (equity) ratio has only just now started to rise. Below, I use blue circles to show the 2011 meltdown and green circles for today's stats. The top pane is the put/call ratio and the bottom pane is volume. Of course, what we face now will make 2011 seem like a fucking picnic. Very ironically, Wall Street and the millionaire/billionaire-set will be the last to realize that the real economy is no longer working. This will also be the first time in history that Wall Street is on the receiving end of a pump and dump rather than delivering one: