Watch the greenback as it could break either way...a pop and the markets drop

The indexes remain just shy of or at their all-time highs despite the mega-warning signals that these levels of euphoria which suggests a potential nasty counter-trend correction is imminent. I have been suggesting that markets are headed into a mega bubble of epic size as all of the preconditions for a mega bubble are in place. Artificially depressed financing costs of new-debt that historically has been utilized substantially to buy-back-stock and keep zombie-firms alive are at record historic lows, new participants in this market today are being drawn like moths to a flame into these giddy markets, and the combination of significant accumulated savings (stimulus induced) and low prospective returns on traditional assets have created the desire to engage in massive speculative activity! In the months ahead, investors will need to pay close attention to risks of a monetary policy reversal, massively rising equity valuations, and the rate/trend of the real post-pandemic recovery. These past 8-9 months can best be described as a period of unprecedented market “extreme optimism and pure euphoria” as I pointed out previously in my weekend write ups there was a wave of bullishness due to recent news, with now (3) Covid-19 vaccines showing promise against a backdrop of FED manipulated zero interest rates, a record fiscal deficit (debt) and an ultra-dovish es-FED-chairman Janet Yellen soon to be in charge of it all as she is Biden’s pick to run the treasury.  This likely blow-off phase is extreme euphoria, the likes of which surpasses even the dot.com bubble. As I have discussed before, the November-December rally has been driven by the mostly shorted hard-to-borrow equities, taking the SPX-500 to technical levels not seen in many-many years, similar to like we saw back to 2000. The November-December rally was clearly a massive-short covering rally as well. As the most shorted stocks were up 28.48% in November alone while the SPX-5000 was up about 11.1%.  

Already Goldman Sachs “most shorted” index of stocks is already up 15% in 2021 and more than 200% over the past year.  The Goldman Sachs Most Shorted Index’s RSI reading is now over 85, only eclipsed by June 20, 2018. Short sellers like myself have been put on the endangered species list 😊 (we have enjoyed some really decent shorts of late) and the fuel from squeezing the newbie shorts appears to be running quite low now as looking a short interest is the lowest in over 15 years for the SPX-500.