US Futures traded marginally higher this morning, off the back of more media narratives of a "95% effective COVID-19 Vaccine". Prior to this most recent, and in all honesty, comedic narrative, it was "stimulus optimism" that drove (global) markets higher. But, I guess investors are not worried about that anymore. What happened to China Trade Deal optimism? I guess that doesn't matter anymore, either. It seems the FED and the government clearly take the public for fools, and maybe for good reason. The real economy is dead my friends, and for years it's been propped up by ZIRP, NIRP, bedtime stories of optimism, never-ending dollar debasement in the form of QE/"Liquidity", and exponential fiscal debt. Stock buy-back's continue to portray earnings growth, when all these companies are doing is perpetually lowering the number of shares outstanding to show earnings growth. Actual revenue growth has averaged just 4% over the past business cycle, vs earnings, which have grown somewhere in the realm of 30%. This is a magic trick, like every other aspect of the stock market. The stock market, as we see it now, has next to nothing to do with stocks, which is quite sad. But, let's see how long this lasts before everyone realizes that bedtime stories, and magic tricks, can't elevate stocks forever...
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After a fairly boring morning session hovering around 361, SPY is losing traction as we approach power hour. The bears have successfully recaptured the ascending channel, and they have us just below the 21 period EMA on the hourly as well. The megaphone trendline is around 357, and I suspect the bears will use this (rare) downward momentum, to take us back below. The 50 period MA on the hourly is sitting right around 357.45, and if the bears can take us below these two key supports, 350 is a stones throw away, where both the top of the triangle, and the 21 day EMA are sitting...
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Vix is now back at a 23 handle, one again, after hitting an intraday low of 21.70, and is sitting at the 50 period MA on the hourly...
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Seeing a few headlines that Cuomo just shut down schools again in NYC. Clearly Mr. Market is not happy about that...
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Momentum is looking quite negative, we're gonna need another vaccine headline asap...
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Bulls showed up and there appears a battle at hand at the ascending channel support heading into power hour. I'm waiting on the pensions who made billions on their overweight equity allocations this month, to rebalance those 60/40 portfolio's before month end. According to Goldman, there's 36BN in pension selling due before month end...
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We almost kissed the 50 period MA on the hourly (357.44), about to break below the megaphone trendline...
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Losses accelerating here as we approach the close. No real support above 350. All the majors, barring the Nasdaq, are now down over 1%...
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That's a wrap guys! Very bearish close to say the least. The bears successfully recaptured both key trendlines (ascending channel resistance, and megaphone resistance), and it was a quasi panic-selling event into the close (potentially driven by pension rebalancing).
Tomorrow we have fresh jobless claims numbers out, so I expect increased volatility, particularly if we see a higher print than last week. Sentiment can shift in an instant, so be prepared for some larger moves heading into the weekend, especially after the massive short squeeze we saw over the last couple of weeks.
Thanks for your time today guys, and have a great evening. Cheers, Michael.
Your problem is that you keep thinking that stock prices are based on what a company is worth. No, no, no silly person. The stock market is just another form of gambling just like sports betting, lottery, and casinos. Always has been, always will be.
I would like to think that this market could not get any more ridiculous, but I went back and took a look at the run up to the great depression. We barely scratched the surface of how crazy it can get. At that time the peak was something like 120% above the 200 day SMA. Right now we are only at 5% and the big push off the March low was around 15%.
Also, I found this interesting tid-bit. "During the two-plus years of the Spanish flu pandemic, the Dow Jones Industrial Average was never more than 5% lower than its level on March 4, 1918, the date some have given for the start of the crisis. In November of that year, in fact, at the height of the pandemic’s second and deadliest wave, the Dow was 11% higher."
I like you charts and your analysis/comments. Keep it up. The bears time will come, some day.
Hedge_Of_The_World
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@Dr_Roboto, Awesome insights as always buddy. The stock market seems more and more like a casino for sure, and valuations can remain distorted for a long period of time, as history shows. But, it's not just the stock market that's distorted right now, it's the very fabric of our reality, across every aspect of life. Things like education, free speech, etc. have seemingly changed forever, and so has the economy. But, no matter the interim distortions, the laws of physics don't change, and imo they're currently in the process of staging a come back. Maybe I'll be the last one standing holding a big fat cheque. Or maybe I'll be bankrupt. Lol. If we look at the market as a casino, my bet would be on physics prevailing. Always good to hear from you buddy. Cheers!
rameshmb
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@Hedge_Of_The_World, I agree with your analysis. There is no stimulus come January that will open the flood gates and we will see bloodbath for sure. And, do you think Trump will handover a great stock market to Biden...you know the answer....lol ?
Hedge_Of_The_World
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@rameshmb, Thank you, my friend! Very well said. I agree. I distinctly remember Trump saying if Biden won, the stock market would crash, and we'd have the worst depression in history. Just a month ago, a Biden victory meant he would lock the country down and raise corporate taxes. Now basically every day we see a gap up, followed by a melt up, after Biden wins...
PreferredStonk
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@Hedge_Of_The_World, even despite that we have a runoff in GA for control of the Senate in Jan. The market showed on election night that it cares far more about preserving Trump's tax policy than Trump himself and jumped once the senate republicans outperformed polling data.
Also, the potential for stimulus from a republican senate and a lame-duck president is not likely. Maybe republicans in the senate will play ball for 750 - 1000 million but not more. I could see Trump pushing for it to bolster his public image. I would say there's a 99% chance that Trump seeks the Republican nomination in 2024 (we'll know soon; he hasn't stopped campaigning since 2015 and will likely announce a bid rather than conceding the race), so I don't think he has the incentive to tank the market in any meaningful way even if he still has the influence.
For investors to continue to ignore the lack of stimulus the employment data has to get worse or stagnate for a couple of months.
All my opinion of course; I'm a new trader, but I'm more familiar with politics.
Hedge_Of_The_World
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@presstrade, Very well said. I agree, I think a potential catalyst here for a (notable) correction in risk assets could be a spike in jobless claims today, and/or a weak payrolls print for November (in early December). Last November, we saw a massive miss in private payrolls with just 67k jobs added. This year I think it could be a lot worse. On the political side, I genuinely never considered the fact that Trump may run again in 2024, that's an interesting thought. Let's see how the many lawsuits that Sidney Powell and Giuliani are working on progress. Imo this election is still very much up in the air. I appreciate the comment, my friend. Cheers!
Rose_Edge
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Thank you, my fellow SPY Whisperer.
Hedge_Of_The_World
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@jamesthedy96, Cheers buddy! I appreciate the support. ;)
I would like to think that this market could not get any more ridiculous, but I went back and took a look at the run up to the great depression. We barely scratched the surface of how crazy it can get. At that time the peak was something like 120% above the 200 day SMA. Right now we are only at 5% and the big push off the March low was around 15%.
Also, I found this interesting tid-bit. "During the two-plus years of the Spanish flu pandemic, the Dow Jones Industrial Average was never more than 5% lower than its level on March 4, 1918, the date some have given for the start of the crisis. In November of that year, in fact, at the height of the pandemic’s second and deadliest wave, the Dow was 11% higher."
I like you charts and your analysis/comments. Keep it up. The bears time will come, some day.