"Happy days are here again, the sky above is clear again, la, la, la, la, la, la, la la, laaaaaa." Another beautiful stock market rally occurs brought to you by Chairman Powell and the gang. Isn't this stuff a hoot? The S&P 500 prints a new all-time record high at 3225.65 and new all-time closing high at 3221.22.
The CPCE put/call is back at the uber lows continuing to signal that a significant top is at hand. However, no one is worried because they are too busy buying stocks.
The green channel shows the steady move south towards call-buying once the Fed began more QE in September-October that continues into 2020 (that Powell says is not QE). The bulls are holding all long positions into the new year while at the same time buying calls to take advantage of any additional late-year stock market joy. The bears have left home for the holidays to drown their sorrows in spiked eggnog. The little spurts higher in stocks in recent days are the last of the bears getting squeezed out, forced to cover, creating short-covering rallies.
It is an interesting juncture. Everyone is long stock and doubling-down buying tons of call options while all the bears have given-up and refuse to short another share of stock as long as they live. What can possibly go wrong? Pause for laughter.
Keystones's 80/20 Rule says 8's lead to 2's (on the way up) and 2's to 8's (on the way down) so the breach of 2800 hinted that 3200 was on tap and Friday it arrives. The breach of 3180 opened the door to 3220 which occurs. The move above 3218 hints that 3222 will print and it does. The all-time high is at 3226 so if the 3228 is breached that will open the door to 3232. This 3220-3232 area is a major milestone for the S&P 500. Remember that the rule works in reverse as well so on the way down, which will occur in the future, a breach of 3222 will lead to 3218. A failure of 3220 will hint that 3180 is on tap and a failure of 3200 will open the door to 2800.
The bullish euphoria is off-the-charts. Another verifying factor of the complacency is that everyone and his bro says there is no euphoria in markets. The VIX prints an 11-handle last week verifying the complacency although interestingly, on the new record stock market highs, the VIX only dropped to 12.04 and closed the week at 12.51. Stocks went up late in the week but volatility is not going down.
The clan is getting together this week to celebrate the new record stock market highs. Aunt Betsy cashed in her savings bonds and bought the QQQ and XLK ETF's because the nice young man at church said that was the best investment for the future. Uncle Frank pulled his life savings from the bank and bot the SPY and DIA ETF's; he said he is sick of watching them go up and now he wants to be part of the fun. Joe and Helen, both upper middle class with professional jobs, are buying each of their three children big blocks of stock for their future as a holiday gift; little Franny receives FB, Tommy is getting AAPL and Emma will love her AMZN shares. Cousin Larry bot steaks for the cookout bragging that he will make a bundle on the semiconductor stocks; he said he just invested his life savings in the USD ETF which is a 2x ETF for the chips.
A collapse in the ETF market could very well trigger a massive crash in the US stock market going forward. Imagine millions of Americans trying to squeeze out the same tiny ETF door at the same time. The introduction of index options back in the 80's exacerbated the 1987 stock market crash. Maybe ETF's are the new index options? Be aware.
Yes, we are in the days of wine and roses. The sun is shining, the birds are singing. The future is bright and nothing can go wrong. Even if stocks sell off, the Fed will step in and save the day since they always protect the wealthy class. The start of 2020 is going to be very exciting. What do you think will happen? This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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