Remember never forget...the power of massive greed and fear of missing
out, and the propensity for investors wanting to own stocks at any price
(taking the long-side, especially when cheerleaders are touting expanding
multiples) if they think the bull-train is pulling away from them they will
want to hop on board at all costs praying for a greater fool to come along so
that they can get out if things get dicey or head south...retail chases highs,
smart money distributes their holdings at the end of cycles! Chasing tops without stops almost always
ends with retail fools crying
There is currently a massive divide happening between the near “depressionary” economy versus a surging bull market in equities. Given the relationship between the two, they both cannot be right or can they, we saw the same back in 2009-2015 when the FED was back-stopping almost all market players with cheap/ near-free liquidity!
We have learned that focusing solely on Economic Data or “BS” manufactured earnings is a mega mistake and likely a waste of time as only the actions of the lecherous FED whose primary job is to protect and enrich their SOB-Banking sons, to enrich the elite/most wealthy while enslaving the masses in DEBT and excessive credit!
More than 11½ -years after I first said that in the “New World Financial Paranormal World” nothing matters for the markets anymore besides the FED and their jaw-boning, basic money for nothing and massive cyber money-printing....so the markets have inferred that since there is a solid FED liquidity backstop, and I have conjecture but I do not know the depth or duration of the current economic the downturn, spending any time reflecting upon economic data releases or focusing on “BS” corporate earnings is a mega waste of time. The CRAP to focus on is the FED and its direct support for the financial and non-financial IG corporate sectors.
This week I believe we could be officially entering the blow-off top phase of the current FED orchestrated rally; as we have seen a record surge in Nasdog volume...with a massive spike in equity call volumes to a new decade high...while the put-to-call ratio has plunged just shy of its all-time lows...sending a clear message the time of increased trader euphoria and buying from retail investors (who as we noted in my real-time trading room were drunk-on-locoweed\) so many locoweed infested bullish fund managers have been saying “retail” investors are lacking is not missing from this market any longer as “small traders are now full-bore bullish, on steroids” (thanks to their belief that the FED has their backs).
Something unusual is happening in our financial markets right now. Both sentiment and breadth figures are at multi-year highs (if not multi-decade highs). When this happens, investors and traders are often split into 2 distinct camps: those who think that stocks will crash (sentiment camp), and those who think that this is another start of a great bull market (breadth & breakout camp)...despite having experiences 11+ years of a historic bull market...While unimaginably high sentiment can and usually does lead to some newbie investor short term losses and market volatility, incredibly strong breadth is more of a long term bullish sign for stocks. Remember my friends that bull markets do not grow to the sun non-stop.
Will the U.S. stock market use months of volatility or a major pullback to wash out current extreme sentiment? Only time will tell. Recency bias encourages our minds to extrapolate the recent past into the future. After a fantastic year in 2020 (especially for everyone who started trading after the Covid-19 March lows), many traders are expecting similar gains in the months and year ahead. Please remember that the near future is rarely just like the recent past, especially at extremes. We can see that the percent of SPX-500 stocks above their 200dsma is at its highest level in over 5 years (91%).
No comments:
Post a Comment