Wednesday, October 31, 2018

Waterfall Crash In Real-Time: Trick Or Treat?

The worst month for stocks since 2008 and the highest consumer confidence since Y2K. Really, what else would you expect in a society full of dedicated denialists led to perdition by their trusted con men?

Market technician Ralph Acampora sees a waterfall decline similar to 1987. Stoned gamblers on the other hand - buying the dip for an entire month straight - see opportunity in 2015 China meltdown, 2016 global growth slowdown, peak earnings, Y2K 2.0, rotation to recession, 1930s tariffs, Fed tightening, and worst month for stocks since 2008:

"Concerns including a US-China trade war, the Federal Reserve's interest-rate policy, and a slowdown in global growth led to a wave of heavy selling."

This was October in a nutshell. Every major decline - including the all time high itself - came on/after Wednesday. Not a prediction, merely an observation.

Why? Because Wednesday is weekly VIX expiration - easiest time to manipulate the market. 

This is the hypothetical Elliott Wave count for a waterfall crash, nested 1s and 2s, each one trend degree larger than the prior.

Third wave down at all degrees of trend. Trick or treat?

The Nasdaq (100) shows us this bounce is all very corrective:

Now picture every risk asset in the world 100% correlated. To the downside...

"Oil and stocks have embarked on the closest trading relationship since early 2016 and during the financial crisis sell-off."

The argument from Trump apologists for why he lies constantly but it's ok, is because it enrages the "progressives", which in turn "motivates" his political base. Thinking slightly beyond next Tuesday, those on the "left" believe that a functioning president should be honest and lucid lest "bad things" are happening. The good news is both sides overwhelmingly agree on one point - he was sent to blow-up the status quo. For that he gets an A+...

Speaking of which, less than one week to the election and consumer confidence is the highest since Y2K while the Nasdaq is tanking like it's Y2K. What could be more interesting than that?

"Consumers do not foresee the economy losing steam anytime soon"

In other words, Sears went bankrupt mid-October and Amazon blew up last week, but the "consumer" is optimistic. The concept of a "consumer", cleaved of job, income, benefits, retirement, and future is entirely an American-made fiction. A delusion sponsored by a reserve currency and paid in full with jobs, wages, factories, industries, and opioid-assisted euthanasia.

Here is where it gets interesting: No leadership in the stock market either:

“All the leadership is getting crushed”

Acampora said he believed that the entire stock market itself would go into a bear market and said the current dynamic in the market was eerily similar to the stock-market crash of 1987"

Also on the topic of 1987, the other reserve currency sponsored delusion is this Banana Republican serial belief in free money. Unfortunately, those who even slightly understand the bond market, finance, or even third grade logic will understand why long-term interest rates are rising, which is killing growth/momentum stocks:

"The debt issuance represents a 146% jump from 2017"

The deficit is expected to come in just shy of $1 trillion for fiscal year 2019 and will eclipse the $1 trillion mark in the following four years, according to official Trump administration estimates."

In other words, Trump is going to eliminate the deficit in eight years as he promised - by expanding it exponentially. Just another one of his 180 degree mega deceptions intended solely for the purposes of winning elections. 

A+ on deception.

"Reagan proved that deficits don't matter" - Dick Cheney

Reagan proved that anyone can be president. Trump proved that Gary Busey is the Republican's go to guy for 2020.

Tuesday, October 30, 2018

Lying All The Way Up. Lying All The Way Down.

Why change now?

Today's Madoff-inspired financial advisors are trying to figure out why their magic bullshit worked so great all the way up and is now failing all the way down. After all, the message has been consistent throughout:

"Buy stocks, and ask not reason why. Because before we had this job we were selling Pontiacs"

Today's rally was compliments of Goldman Sachs which announced yesterday that an impending rally would be forthcoming as companies exited the stock buyback blackout window. For today at least, they were "right". In the same way that the Madoff acolytes were right all the way up. 

This is what 37x average volume looks like:

Let's also not forget that it was Goldman Sachs who said last year that companies with the largest stock buybacks underperform the overall market. That trend has continued in 2018...

Getting back to reality...

This has been the largest monthly decline in the Nasdaq since October 2008 on both a relative and absolute basis:

The smart money knows this con job is over. So much so that they've been shorting the weakest sectors, specifically semiconductors and retail. This has given Skynet new life chasing shorts out of the casino. After all, if you can't find buyers below the market, might as well find them above the market. Be that as it may, these short-covering rallies are getting weaker and weaker. Goldman Sachs-inspired rallies notwithstanding. 

The fifth failed rally in 10 days:

Here is where it gets interesting, semiconductors are one of the worst performing sectors because everything uses semiconductors now from smartphones to video games, AI, crypto servers, automobiles. So as those sectors roll over, they take the related semi companies down with them. 

There was a three day short-covering rally in semis in mid-October, and one now. In between the wheels came off the global risk bus:

Zooming out on semis and we see that the S&P 500 is following closely behind:

Another sector that gets heavily shorted are the clothing stores

These too are rallying right now with every bounce in the futures. Notice that when the short-covering ended in February, the S&P quickly re-tested the lows: 

However, as a ratio of the S&P, the rally is not as impressive:

Next, we get to beaten down Chinese Tech stocks. These too have enjoyed something of a rally recently. Again, some would have us believe that the Chinese government "controls" their stock market. If this is control, I would hate to see loss of control. 

"China’s securities regulator stepped into a tumbling stock market to assure frayed nerves, but stumbled in its attempt by misspelling the name of its supervising body, creating confusion"

Apparently, clarification by the Trump administration that escalating tariffs have always been on the table, also placated markets. Because you wouldn't want any confusion hanging over that policy.

Which gets us to Amazon, which is likely neither shorted nor bought for any reason. Just a pile of lead in the portfolio of every hedge fund and about 200 ETFs.


Bye bye Feb. lows:

Real Estate Third Wave Down

And here we are, back at this bullshit - the reason the 'Conomy went under the bus in the first place:

File that under "careful what you wish for", because semiconductors are confirming the cycle is over...

Worshipping At The Altar Of Desecration

The true cost of this failed way of life is not measured in dollars...

The endgame to this Roman Circus has never been clearer than it is right now. Crystal clear. Ten more years of lying abided ten more years of aging, capped off with a blowoff top of unfettered delusion. One could not imagine a more Machiavellian outcome than the one at hand. And yet most people still don't see it coming. The ephemeral "triumph" of human delusion and corporate brainwashing, over nature...

Somewhere along the line America inverted morality to embed the seven deadly sins as aspirational lifestyle. Instead of being used as a way to improve morality, religion was used as a shield to sanction descent into depravity. Now featuring Donald Trump as saviour.  

America casts itself as the most religious of all developed nations, and yet it has taken greed and gluttony to a scale no other country can even imagine. The chasmic gap between rich and poor having a gini coefficient on par with the nation of Turkey. Ultra violence is another area where America excels above all others. Whenever violence control measures that have succeeded elsewhere are proposed in the U.S., apologists for the status quo use the argument - "That won't work in the United States, we have an exceptional culture". Who can argue with that logic?

To be sure, there has been a heavy price paid for this faux morality. Trump himself was elected by the "Deaths of despair" campaign strategy. And this past two years is nothing more than taking a failed strategy based upon corruption and immorality to a level that any sane American fifty years ago would never even imagine. 

This all falls under the category of self-inflicted abuse. So for those who can possibly imagine a way of life not ordered around "more", there is mostly certainly a future on offer. However, for those welded to the consumption-oriented lifestyle, this is all a massive dead-end. 

The proximate cause of failure will be the head-on collision between healthcare and life expectancy, as beyond the mega bubble there will be far too few resources to support an aging population of diabesity-riddled consumption junkies. Rationing of resources will be a death sentence for the chronically ill, especially those needing assisted living. The costs of assisted living are already skyrocketing. And the demographic peak of aging is still years in the future. 

The only defense against chronic illness is a healthy lifestyle. But try telling that to a society that treats its own bodies like a corporate toxic waste dump. No surprise, obesity levels spiked sharply in the past ten years, as the decade of lying took its toll on mental and physical health. 

Throughout this age of "more", nature has inflicted its insidious toll in the continual trade-off between quality and quantity. Sure there is more quantity of food to be found in the grocery stores, but most of it is mass produced nutritionally void Frankenfood. Most people can't afford to buy organic foods, and most don't. Therefore they are at the mercy of Monsanto and Dupont. Which sadly have no mercy, only a quarterly bottom line that must increase metronomically. To date, much of the true cost of their corporate "externalities" has been borne by broader society. However, post bubble crash those unaccounted "externalities" of disintegrating societal mental and physical health will spill out onto the street. As "more" gets unceremoniously realigned with nature and reality. 

This has been an interesting experiment in inverting morality, but the cost of it all has been rising in lockstep. And it was never hidden from view. Especially when Donny entered the circus signaling the endgame was nigh. And yet who could warn them not to embrace the deathstyle of "more".

Their idols on TV selling it to them?

Monday, October 29, 2018

Trumptopia Mid-Termination

"Good news", the recession trade is on in size...

One week until the mid-term elections, and this is all getting very interesting. While the sheeple at large focus on who gets to steer the Titanic next, both sides seem to have overlooked the fact that it has a new deck configuration...

"Full speed ahead"

Whereas the political class see existential "culture wars" - whatever that means - I see two bald men fighting for a comb. Little do they know that their consumption-oriented Matrix is flickering like a cheap incandescent. Two years well past its useful life. 

The problem in a nutshell is that Skynet is going head-to-head with the Nasdaq and losing badly. Today was a 900 point intraday Dow crash on news that Trump was planning to escalate tariffs on China to the full $500 billion. The only problem is that it was old news. He already said back in July that tariffs will automatically escalate. In other words, what transpired today with tariffs and the stock market was already discussed three months ago:

KERNEN: Would you ever get to 500, though? We’ve got the –

PRESIDENT TRUMP: I’m ready to go to 500.

KERNEN: With the midterms on the horizon.

PRESIDENT TRUMP: So, I think it is –

KERNEN: What if the stock market were to go down?

PRESIDENT TRUMP: Well, I actually think that’s – well, if it does, it does. Look, I’m not doing this for politics.

Don't worry, Trump has made it clear on Twitter that if stocks tank, EVERYONE is responsible EXCEPT him. The Fed, Democrats, China, El Nino, Hillary Clinton. I'm just not fully convinced anyone will give a fuck. Because I can readily assure you, they won't. 

Which gets us back to the casino and the "good news" that an intra-day crash of nearly 1,000 Dow points was triggered by something we already knew. What we are seeing is a massive end-of-cycle rotation out of growth stocks into recession safe havens, which is causing a no bid Nasdaq.

Today Amazon continued its post-earnings obliteration that started last Friday. And Apple also began to break down on heavy volume.

The Nasdaq 100 is getting pounded daily on 2x to 3x average volume.

October has erased 12 months of gains in the most beloved momentum stocks

Stop losses and margin calls below this line:

Hedge funds are getting annihilated because they don't own Campbell Soup, and there is no buyer (big enough) for the momentum roadkill they are trying to sell. 

They can't get out without imploding their own positions:

Having round-tripped into negative territory, U.S./Rest-of-world correlation is now back at 99%.

To the downside:

As far as "safe havens", what we are really seeing breaking this crash so far, is Wall Street monetizing what few hedges they have left into a cascading waterfall selloff. 

Before all hell breaks loose


A Conspiracy Of Dunces

This is the part where global capitalism self-destructs in order to prove that it's the best option available. Because everyone knows that anything less than all out rapacious greed would be "socialism". These hardcore dumbfucks didn't just bet everything they own on Herbert Hoover, they bet their ideology on him as well. There will be no bailout for the casino class this time around...

Being bearish used to be difficult, at times very difficult. Now however I find myself worried about the mental health of optimists. These people are not wholly sane...

This is like investing in the Dow in 1930 AFTER the crash and at the time the Smoot-Hawley tariffs were imposed:

Below, this is the type of delusion that is rampant right now. That an imploding China is "good news" for the U.S. because it means more negotiating power for the U.S.. Does the term Pyrrhic victory mean anything to these dunces?

This is subprime 2.0:
"When the middle class blows up, boy will we be rich"

"China is facing its "worst financial situation" in 17 years, says Bass, who made a huge currency bet in 2016 against the Chinese yuan.

Bass is known for profiting and betting against subprime mortgages during the 2008 financial crisis."

What has changed since the last tariffs were imposed is that correlation between Chinese Tech stocks and the S&P 500 is now close to 100%. Back in the summer, correlation was negative:

"but the arbiter of the Chinese plan is their exchange rate with the rest of the world," Bass told CNBC's David Faber"

That was only good for limit down S&P 500 in 2015:

For those who have retained their sanity, the freight train is right on schedule:

"Fund managers cut bullish crude holdings to 15-month low"


Stock Buybacks: Artificially Suppressing Reality

Masking disintegration is the overwhelming preoccupation of this rotting society...

It's now impossible to know where the casino will end the day based upon the overnight futures, due to extreme volatility. As of Monday morning, futures are ramped on news that Angela Merkel will not run for re-election and news that Italian sovereign bonds were not downgraded. At this rate, the world still turning on its axis will soon be catalyst for mega rally. 

Stock buybacks have replaced Fed dopium in artificially suppressing volatility, which has given gamblers a false sense of complacency. And yet, despite a doubling in stock buybacks in 2018 versus 2017, volatility is far higher this year than last year. In other words, reality is no longer being "suppressed"...

Hourly volatility is rising in lockstep with new NYSE lows:

As I've said many times, stock buybacks are the biggest indicator of a failing economy. The slowest growing companies use buybacks to return capital to shareholders by shrinking their share count, because they have no good place to invest it...

"And while the market appears to be discounting still solid earnings, amid concerns of "peak profits", one critical catalyst may prompt a substantial return of optimism this week: the return of buybacks."

I suggest not. It turns out that the market has figured out that stock buybacks are a sign of weakening fundamentals in terms of growth and balance sheet solvency. 

"Of the 350 companies in the S&P 500 that have repurchased their shares this year, 57% have underperformed the overall market."

The trend has been particularly pronounced in 2018

“The evidence suggests that investors should check the balance sheets of the buyback companies"

Just 10 companies account for 78% of all buyback activity, according to Goldman, while Apple alone accounts for 24%.

This last point gets us back to the Zerohedge article cited above. These stock buybacks are concentrated in mega cap stocks. It also gets us back to the hourly chart above showing rising volatility and rising new lows:

"Goldman notes a peculiar technical development, namely a sharp narrowing in market breadth during the recent price volatility."

All stock buybacks have done is to supplant the Fed in creating a liquidity-driven illusion concentrated in fewer and fewer stocks. Which happen to be the fundamentally weakest stocks in the market with respect to growth and balance sheet solvency.

The other thing that stock buybacks have done is papered over the fact that revenue growth on an aggregate basis is a total delusion:

This is the chart that Wall Street never wants us to see:

Getting back to rising volatility, disintegrating breadth held together with stock buyback bailing wire isn't helping the situation. Neither is 50 point gap up opens based upon short-covering in Deutsche Bank. 

Speaking of which: