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Stocks are irrationally exuberant again this morning after soaring in the overnight session as tensions at the Capitol subside, and Biden is (finally) declared the victor of the election. Is anyone surprised to see another gap up this morning? I'm certainly not, but I do suspect that as we approach the top of the white channel around 378, which is an arms length away from the ATH, we'll see some heavy selling from smart money, who have not participated in the market rally since November. Don't forget that much of the rally coincided with a stark rise in M1, which rolled over into December's price action. Now that the very last few dollars of American's savings have been invested/spent, the only buyers left are corporations and the central banks.
I'm not sure if you guys follow the global bond market, but approx. $13 Trillion is about to mature, which could lead to a cascade of defaults across bond markets. We're already seeing a spike in the risk free rate above 1% for the first time since March, which is only going to exacerbate the issue as CTA's begin to sell, and they may even potentially go short if yields continue to rise. According to a recent report by Morgan Stanley, if the 10Y yield rises another 1%, (from 1% to 2%), this could have a direct impact on market valuations (up to a 22% drop in multiples {PE} on the Nasdaq in particular). In other words, the 10Y yield could be signaling to investors, that an imminent market crash is coming. Having said that, we all have to be prepared for the fact that the FED might step in, like they always do, and change the rules of the game.
In the jobs market, we saw another 790k American's file for unemployment benefits for the first time last week, while continuing claims remain above 5MM. The moral of this story will be that misallocated capital does not fuel productivity in the real economy. It debases the currency, and hence the purchasing power of the working class, while only the asset owning class benefits from the induced inflation-like consequences. Interestingly, the velocity of money is little affected by the current monetary debasement regime. If we were to focus on debt levels, for example, we'll immediately free up productive capital, and increase the velocity of money, leading to (actual) inflation, by the FED's metrics. But hey, what do I know, I'm just a trader.
Thanks for your time today guys. If you enjoyed the analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.
I'm not sure if you guys follow the global bond market, but approx. $13 Trillion is about to mature, which could lead to a cascade of defaults across bond markets. We're already seeing a spike in the risk free rate above 1% for the first time since March, which is only going to exacerbate the issue as CTA's begin to sell, and they may even potentially go short if yields continue to rise. According to a recent report by Morgan Stanley, if the 10Y yield rises another 1%, (from 1% to 2%), this could have a direct impact on market valuations (up to a 22% drop in multiples {PE} on the Nasdaq in particular). In other words, the 10Y yield could be signaling to investors, that an imminent market crash is coming. Having said that, we all have to be prepared for the fact that the FED might step in, like they always do, and change the rules of the game.
In the jobs market, we saw another 790k American's file for unemployment benefits for the first time last week, while continuing claims remain above 5MM. The moral of this story will be that misallocated capital does not fuel productivity in the real economy. It debases the currency, and hence the purchasing power of the working class, while only the asset owning class benefits from the induced inflation-like consequences. Interestingly, the velocity of money is little affected by the current monetary debasement regime. If we were to focus on debt levels, for example, we'll immediately free up productive capital, and increase the velocity of money, leading to (actual) inflation, by the FED's metrics. But hey, what do I know, I'm just a trader.
Thanks for your time today guys. If you enjoyed the analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.
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New ATH. Mission Accomplished? Note
Vix is getting smacked in the first hour of trade, but found support near yesterday's lows: Note
Look at this beauty, 10Y yield breaking out nicely, next stop 1.43%: Note
The dollar is breaking out of it's intraday descending channel, potentially showing some liquidation in bond markets: Note
The Put/Call ratio is still showing extreme complacency, but something's brewing: Note
Check the Nadsaq (QQQ). Anyone want to buy London Bridge just before it falls? No insurance though, sorry: Note
I just saw Elon Musk is now the richest person in the world. Well done bud! You should send a thank you note to Jerome Powell...Note
Clear decoupling of Vix and S&P, Vix is not buying the bullish narrative today. We're rising as the market rises, which could imply Vix is currently underpriced: Note
It's all about the daily candle right now, as we've seen strong rejections at the upper band of the white channel, and it's held since the second week of November. Obviously for our bearish thesis to play out, we'll need to see a reversal of the uptrend at some point. This could very well be the day we see the last ATH: Note
Vix is now back at the low's of the day, but finding support once again around 22.50: Note
Bitcoin is up 6% on the day, and we're looking at extremely overbought levels right now with a weekly RSI of 95. A large correction could be imminent: Note
SPY seeing some weakness as we approach the afternoon session: Note
I find it crazy that in the same year we witnessed a pandemic, which (partly) caused the worst global stock market crash since the Great Depression, and over 70 Million American's filed for unemployment benefits, that we then saw the strongest market rally in history follow. By the end of that same year, the top 20 richest people in the world increased their wealth by over 30% on average, while the rest of the people of the world went tens of Trillions further into debt, with each US citizen for example, including babies, approx. $83,000 in debt. Just thinking out loud guys, you know me...Note
Fourth hourly candle outside the stratosphere. Bulls are getting low on Oxygen: Note
Apparently Goldman's base thesis is that dems will pass another stimulus package as high as $750 Billion in February. That's a measly 3% of GDP btw. As I've said, best of luck continuing in this direction, with yet another round of unproductive capital via debt.Note
Citi just downgraded US stocks as they see a flat 2021 across global equities, apparently. Doesn't seem like a very good risk/reward to be long stocks right now. But, yet here we are at all-time high's again...Note
Upper band of the white channel acting as support now, and with December payrolls out tomorrow, I wonder if smart money will flee for the exits as we approach power hour: Note
Testing the HOD once again. Hourly RSI just kissed 70: Note
Vix is back at the LOD again, around 22.50. I think it goes without saying equity protection is cheap. There's a Ferrari parked in front of you, and it's free. Investors be like, "Nah."Note
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Final minutes of trade here, and we're seeing a nice spike in volume, but price action appears muted. Slight sell off, but I'm not convinced: Note
That's all she wrote! It was a one way highway for most of the day, and then a snooze fest in the afternoon session. We saw some light selling into the close, but the bulls successfully captured the white channel, on the daily, for the first time since the second week of November. We have an important December payrolls print out tomorrow morning, pre-market, and I don't think it's going to be very pretty. Based on the ADP print earlier this week, we're looking at 123k jobs lost in December.I don't know about you guys, but I'm wrecked. It's been a long day, but now it's beer O'Clock, and I'm about to spark a massive jay, imminently. I hope you guys enjoyed the analysis today, and do enjoy your night. Cheers, Michael.
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