The Road To Perdition

There were a few lessons from 2008 that need to be learned the hard way. Not the least of which is: All it takes to con the all-knowing hairless monkey into believing ANYTHING, except the truth, is enough time and unfounded bullshit. How else to explain 5,000 religions and only one god-given reality - everyone wanted their own version of what won't happen...

The way a waterfall crash works is as follows: First there's an unexpected decline, which is followed by a vigorous rally, attended by vigorous amounts of bullshit. Unfortunately, the rally falls short of the prior high. Then comes another unexpected decline. Which is followed by a less vigorous rally, yet attended by substantially more obligatory bullshit. 

Which is where we are right now.

The porn-star "relief" rally is now back-testing the two year trendline. I feel better already...

During this process of stair stepping lower, one by one the "leading" stocks get taken to the woodshed...

Until, there is no leadership left...

One thing the Idiocracy didn't learn in 2008 is that Wall Street is a casino just like any other. And they don't get paid if people are cashing in their chips.

The other thing they didn't learn is that the people hand-picked to borrow us out of a debt crisis, were all by necessity, con men. 

Because after 2008, no one could make Globalization great again 

Ponzi schemes end of course, when there is no one left to con.

The Staining Of The Underwear. Yes, Again...

America's moral standard has collapsed like a cheap tent. It now falls to elementary school kids to fix the country, while 70 year-old degenerates run amok. Needless to say the history - written by the young people - will not be kind...

Jimmy Kunstler and Jimmy Cramer were both peddling the nothing-to-see-here line for their beleaguered groper-in-chief. Feeling the love, the casino put in its best one day performance in three years. Proving once again that bear market rallies are always the best, if not the shortest-lived. I wasn't going to post today since the casino is only back to the same level as it was at Friday's open, but dumb and dumber made it impossible for me not to inveigh...

"They didn't have a tape"

No piss tape, no problem. America's moral standard can't get any lower. Of course I've been saying that for ten years straight. 

The porn relief rally visualized:

Contrary to popular belief, from Skynet's perspective, today had nothing to do with porn stars and everything to do with desperately avoiding overnight breakdown through the 200 day. Why? Because the casino is still only 70 points above the moving average that has led to limit down futures three out of four times. The only exception to the limit down rule was January 2016, wherein the casino straight line imploded -15% in two weeks:

Here we can compare the February selloff versus this one vis-a-vis the League of Extraordinary Money Printers. Despite the 70 point S&P rally, new lows outnumbered new highs all day today by a wide margin. In other words, gamblers who believe that the porn rally will be a repeat performance, will be in for a shock:

But here is where it gets interesting. For months I've been saying that the average stock is getting hammered, while the casino is supported only by the big caps. Well, last week that reversed. The average stock held up much better than the mega caps. So I looked for prior times when that has happened by comparing the NYSE Composite % bullish to the S&P 100 % bullish.

Here is what I found:

Door #1 is Flash Crash deja vu of 2015

Door #2 is Lehman deja vu

We know where I stand.

And wouldn't you know that despite today's rally, the % bullish for the S&P 100 actually declined again today:

Of course the NYSE is nothing to write home about either. Diverging substantially from the February low:

Weak, weaker, weakest...

Looking at some other inconvenient realities...

Yield curve new low today, banks are deja vu of last year's fake reflation scare:

Oil is ready to mega implode taking the entire world down with it...

Here is what I find most interesting - All year long, dunces on Wall Street have been saying, what is wrong with GE?

It turns out, nothing.

THIS Is Lehman 2018

This was a seminal week. For the first time in decades, the U.S. economy was placed ahead of the stock market. Unfortunately, gamblers didn't de-risk in time...

Here comes a good lesson delivered by my new friend Donny, to those gamblers who elected a proven con man for president under the auspice that he would be fucking everyone else on the planet, except his own wife. In other words, he's the *new* Christian, beloved by all of the sanctimonious hypocrites. 

In con man parlance this is known as "the bait and switch". It can be costly for any dunce who falls for it:

As I was saying in my prior post, the last time Friday was a down day, was the beginning of wave 3 of 1 down. Yesterday and today mark the beginning of wave 3 of 3 down. Which is what makes it the Lehman wave:

The Nasdaq's island reversal of fortune and resulting break of the two year trend-line

aka. Mega bull trap:

Volatility

Tech

Large caps

Banks and the Yen carry trade

China Tech

"Overnight risk"

Consumer staples

It would take only a small market drop on Friday to trigger something big — a sell signal from the famous Dow Theory.

Among the investment newsletters I monitor, for example, no market timing system is more widely followed. Countless individual traders use it to decide when to build up cash.

To appreciate just how close a Dow Theory sell signal is, read my March 2 column in which I detailed the three-step process required to generate such a signal. Suffice it to say that the market has already jumped over the first two of those steps. The third and final step requires the Dow Industrials to close below 23,860.46.

Today's Dow close: 23,533.

 and the Dow Transports DJT, -1.84%  to close below 10,136.61.

10,163:
I have a hunch this last distance will be covered in another time zone...

In Wall Street We Trust. Yes Again...

There was only one lesson the Idiocracy had to learn after 2008 and they couldn't even learn that much...

All of Trump's tax cut is going down the stock buyback shit hole. 

Any questions?

Wall Street has used many gimmicks to keep the casino artificially levitated, for the sole purposes of dumping junk onto the unsuspecting sheeple. In doing so, they have created a false sense of liquidity...

If that's what you want to call it:

Case in point, despite the highest volatility in two years, there have been no down Fridays in the past six weeks. This is not a prediction, merely an observation...

Here is where I'm going with this:

An Introduction to weekly options:

"Investor interest in the weeklys has surged since 2009, with average daily volume of just the S&P 500 weekly options exceeding 520,000 contracts in 2017, a 35% increase over 2016"

Blue arrows point to Fridays. The last down Friday is circled (February 2nd). Lower pane shows down volume ratio:

Why does this happen? I hypothesize two reasons: the most obvious being that Friday is weekly options expiration. The second being that Friday is when most IPOs are priced. A convenient intersection of expediency and peak weekly leverage. 

This chart shows the net point gain by weekday for the past three years. Wednesday is VIX opex. We see that the two opex days have the best point gains, and the two days following opex have the lowest point gains - in direct proportion to the prior day's gains. Wednesday/Thursday being particularly stark:

In other words, using the weekly options, Wall Street has essentially cornered the market. In a low volatility, low volume market, this type of contrivance can generate a false sense of liquidity.  

The other gimmick that has been employed is the mega share buyback. On a net basis corporate share buybacks can account for ALL of the S&P 500 gains since 2009. 

And yet, we see that the buyback fund is no longer keeping pace with the S&P 500. Meaning companies are wasting more and more money to create less and less effect. 

"The Trump tax cuts aren’t going into new investment — in fact, remarkably, investment has fallen in January in the US — but into share buybacks that reward shareholders and goose the share price to the advantage of company executives via their remuneration packages."

"But what no one seems to have expected...just how massive the rise in share buybacks actually is...2018 will see — by far — the highest level of share buybacks in US corporate history, smashing the previous record of 2007 and topping $840 billion"

The bottom line is that all of these gimmicks have a limited shelf life before they turn back into pumpkins:

This is record buybacks. Can't you tell?

And then it gets back to the increasingly arduous challenge of finding the next dunce to follow...

Trump Giveth. And Trump Taketh Away.

The gambling class bought the tax cut and now they're selling the trade war. Unfortunately, there is no one dumb enough to be on the other side of that trade...

Risk aversion is following the sun. Technical damage is mounting with each passing minute. Global synchronized mega crash is approaching the rubicon.

What we notice today is that the largest cap stocks are weaker now than they were back in February. What is known as a "negative divergence"

Asia is being led down by Japan:

As I write, the Nikkei has gapped through the 200 day moving average, the key support line for the past two global crashes. I penciled in the current level on today's U.S. close:

Europe, which has yet to open, sits right at the crash support line:

For some perspective a wider view of Europe:

The world ex-U.S. with NYSE breadth:

Cramer correctly frames Trump's trade war in terms of the economy versus the stock market. Because that is the trade-off  in the short run. However, like all of today's frat boy pseudo-elites he's not bright enough to understand that a stock market can't exist without an economy. Because that's the trade-off in the long-term. 

Decline about Trump and the elites from CNBC.

He goes on to say that the gambling class are protesting these tariffs by re-pricing their own assets. Lower. He says that unfortunately the erstwhile middle class who lost their jobs to the stock market can't halt this decline because they don't have any money to put into stocks. 

I couldn't have said it better myself. 

Well-Trained Monkeys

There's no sign of panic. Or life for that matter...

Sage advice from a Wall Street CEO, circa 2007:

"You've got to dance like a hairless monkey while the music's playing. That's how the system works"

Speaking of well-trained monkeys, this week is the trifecta of mega risks: Trump's trade war, a Fed rate hike, and the largest IPO of the year, all this week. Which means:

First the good news, the global trade war began promptly at 12:30 pm Eastern.

"Don't worry, this is just the first salvo of many. Our trade partners are going to love us. Trade wars are good and easy to win. Believe me"

Where to begin...

Here:

There:

The top performing sector today was Utilities, one of the smallest sectors (lower right). The two largest sectors, Tech and Financials got monkey hammered

Not the slightest sign of concern. Or even vital sign.

2016 would be the best case scenario

With one caveat - there are no chairs left for dancing monkeys...

Today's top performer:

"Dropbox priced its IPO above expectations at $21 per share on Thursday night, a source told CNBC, setting the stage for the technology company's stock to hit the public market on Friday.

The company is likely offer 36 million shares, a source said, and shares are in demand. The offering is 25-times oversubscribed, the source said.

Dropbox's IPO will raise $756 million, the biggest tech IPO since Snap started trading last year."

"The perfect conditions for a large IPO"