Unfortunately, there's no way to warn stoned zombies who are locked in their own happy Groupthink feedback loop. People go ALL IN at the end for some reason. Something about throwing their life savings away makes them feel wealthy...What I call "Shanghai Surprise..."
As it was in China, the Fed has systematically conditioned gamblers to take on more risk. Any sign of economic weakness has been seen as a benefit to the stock market. So when the Fed finally admitted last week that the economy is seriously weakening, the Pavlovian gamblers doubled down on Facebook.
Shanghai Surprise visualized:
The Chinese goverment encouraged people to embrace risk, so they did...
Doh!
The "animal spirits" are what drive stocks higher. The marginal gambler's willingness to go ALL IN...
Pedal to the Metal visualized
The Nasdaq/S&P ratio.
For this entire seven years, except for the blue box, the most speculative stocks aka. the Nasdaq, have led the rally. Until December. That's when the rotation to defensive stocks kicked in...
The Facebook / S&P indicator:
The animal spirits are driving right off a cliff...Google's earnings are after the close, so that should be the last moon launch...
Loading up for the ride lower...
This "rally" is in its 9th day, so I took the 9 day moving average of price over volume to compare to other rallies...
I call this the "Churn ratio": A lot of volume to go almost nowhere...
Spot the Santa rally at the end of each year, when volume is light and Skynet ramps the market...
Shanghai Surprise redux
"Granted, back in the day, when we used to throw it all away, rates weren't already at .25%. Every generation has to learn for itself, or not..."
