Wheee! Whooopie! Wheeee! The SPX prints a new all-time record high at 3740.51 and new all-time record closing high at 3735.36 both on Monday, 12/28/20. The bulls proclaim Joy to the World. The bullish euphoria continues as folks celebrate the holiday season, vaccines and more stimulus money. You would expect a sell the news event now but in this holiday season, in the middle of the Santa Claus Rally, with a full moon, and a push towards year-end, all positives, the bulls are partying like its 1999, without a care in the world. Everything is going the bull's way, well, except for the charts. S&P futures are up +17 and the VIX is down to 21.44 about one hour before the opening bell so the bulls are tripping over each other to buy more stocks at the ask.
The uber low CPC and CPCE put/call ratios, and their respective 21-day MA's, signal a significant top at hand. The complacency is off the charts. Uncle Lester, that never invested in stocks, withdrew all his money from the bank yesterday and now stands in front of Carl Chisler's office, the broker in town; between the dentist office and grocery store. Lester plans to buy AAPL stock with his life savings because someone said something about electric cars on television. Later that day, he brags to the church group that he owns Apple stock and he is going to be bigtime in a year or two.
The bulls are running on Wall Street. There are no bears. Zero. Everyone is drinking Fed wine and celebrating the easy wealth accumulation, well, only if you are already wealthy with a large stock portfolio, that is. On CNBC, Evercore's Ed Hyman says stocks will continue higher due to ongoing central banker liquidity. CNBC commentator Bob Pisani cheerleads Hyman's message. CNBC commentator Mike Santoli expects markets to go higher despite high margin debt that is at record levels. Santoli says the high margin debt is to be expected with stocks at record highs and it is "not any kind of red flashing light for the rally." Thomas Peterffy is interviewed on CNBC and he expects the stock market to move higher for the next 2 or 3 years. It is comical at this point. There isn't a bear to be found in Whoville; all the little Who's are all long the market.
The Aroon shows the green line at the maximum possible one hundo level and the red line at the minimum possible zero level. The stock market cannot get anymore euphorically bullish, confident, fearless, no one believes stocks will ever go down and even if they do the Fed will print more money and they will sky rocket higher again (moral hazard). This behavior is verified by the uber low put/calls and the SPXA150R at 88.
The red lines show universal negative divergence across all chart indicators (price moves higher but all the indicators move lower) which indicates a spankdown on tap. Price has some momentum after yesterday's orgy so we shall see if it can push the top out for another day or so. The stoch's are coming off overbot levels and the RSI lingers near overbot so both are agreeable to a pullback. The red rising wedge is ominous. This may get exciting very fast folks a la a flash crash. You may get up to go to the can and by the time you come back the SPX may be at 34 hundo and dropping. The collapses from rising wedge patterns can be quite dramatic. SPX price is extended above the moving averages requiring a mean reversion lower.
Price violated the upper band yesterday so the middle band, the 20-day MA, at 3685 is in play as well as the lower band at 3633. The purple arrows show the bands squeezing in tight forecasting a big move at hand. Tight bands, however, only tell you that a huge move is coming but not direction. Price indicates yesterday and this morning that it wants to run higher but that is a tough story to believe in. For all the reasons above and more, the expectation, even no-brainer, is that a big smack down is about to occur. Of course, in these erratic and unstable markets, with King Donnie Trump hiding and tweeting in the Lincoln Bedroom, anything can happen. It would be surprising for stocks not to drop.
The ADX is down at 17 so the big rally over the last couple months is NOT a strong trend higher. Figure that one out but that is what it tells you which means the goosing of markets is all on Fed and Congressional easy money and other hype, and probably a lot of novice investors getting involved in markets at the wrong time. The blue rectangle shows the last strong trend which was higher from August into the September top and that was all she wrote. The ADX is telling you that price has no business being that high. The blue ovals for the volume candlesticks show four big distribution days occurring this month where the smart money was handing off shares to the dumb money. Are you the dumb money that was buying?
If it was not for the goofy holiday trading, the stock market may already be on its way south. A multi-week selloff is likely on tap although the monthly chart may want one more up in February or March. You have to wait to see how the charts and markets play out on the selling. Once this selling begins, considering the uber nosebleed heights, the whole ball of string may unravel from here forward without a significant rebound. Nonetheless, Q1 2021 will likely go down as one of the most historic quarters in history with a significant stock market top occurring.
Keep in mind that they may want to tank the market to give King Trump a proper sendoff. A big drop in stocks between now and 1/20/21 would take away more of Trump's legacy, that he did a good job of damaging himself with his cry baby stuff, and at the same time set Sleepy Joe Biden up with an easier path to victory. It's like the new CEO taking over the company. What is the first think he/she does? Assess the company and can 25% of the place taking lots of charges and expenses. The quarterly numbers will be a disaster but analysts will say the new guy just started so no one judges him/her on those atrocious earnings numbers. Once the baby is thrown out with the water, it is easy to beat the comps going forward each quarter as the CEO gets the company back on firm footing and making dough again. Plus, the executives pay is likely tied into stock options and other goodies like bonuses if stock prices are hit. Thus, the stock market may look a heck of a lot different three weeks from now (far lower than current prices).
So it remains all systems go for bears--as comically stocks make new record highs. Sonny and Girlie, if you are new to trading stocks, and now think you are Jesse Livermore because of the recent rally, you ain't. Get out of the stock market before you get hurt. Keystone is sharpening his knives now and once it begins there will be no mercy. It will be slice and dice time. Even if the bulls hold, stocks will roll over anytime in the days ahead. This is great fun to watch. Few realize how important the price action is nowadays. Strap yourself in and prepare for anything. Get out of the market if long, otherwise, once she is flushed, you may find yourself frozen from reacting to it. 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.
Note Added 12:00 PM EST Noon: It's sammich time. The bears are eating sh*t on rye. Out of the gate, the S&P 500, which is the United States stock market, jumps to 3756.12, a new all-time record high on Tuesday, 12/29/20. Whheeee! Whoooopie! Wheeeeee! Life is a Cabaret, ole chum. Come to the Cabaret! Taste the Fed wine! The all-time high occurs at 9:30 AM EST at the opening bell but then the stock market falls on its sword. The SPX now stumbles sideways at 3740 with the SPX 1-hour, 2-hour and daily charts all in neggie d. Blow on the stock market; that may be all it needs to fall over and collapse. AMZN is up +1% today keeping stocks buoyant. VIX 22.32.
Note Added 12:30 PM EST: SPX 3734. VIX 22.71. Volatility is spiking so stocks should be dropping more than they are. SPX 3732. VIX 22.75. The S&P 500 slips negative on the day the joyous all-time record high is already a distant memory over 24 points ago. Keybot the Quant algorithm, which is currently short, is tracking VIX 25.19 as a key bull/bear line in the sand. Bulls are okay if VIX remains below 25.19. Stocks will fall apart if the VIX moves above 25.19.
Note Added 12:37 PM EST: SPX 3730. VIX 22.88.
Note Added 12:41 PM EST: Let the bleeding begin. Perhaps Pachelbel's Canon in D is appropriate for the potential slaughter. So calming as it echoes across the snow covered mountains in the beautiful Laurel Highlands of southwestern Pennsylvania. Spectacular. The VIX prints a 23-handle at 23.07. SPX 3728. Did the bears eat their spinach this morning? Keystone stands before the trading floor, knives in hand, ready to begin. Is it time Pachelbel?
Note Added 12:46 PM EST: SPX 3726. Flush the bastard, boys. VIX 23.23. SPX 3725.
Note Added 1:47 PM EST: SPX 3726. There is a lull in the action as the bulls and bears size each other up. VIX HOD 23.43 so watch that closely. VIX is at 23.15 ramping higher. The bears have it on a silver platter if they want it but they have to choose to take it. We need some Angus. Thunder! Thunder! Thunderstruck! VIX 23.12. SPX 3729. AMZN +1.9%. King Bezos dances with glee.
Note Added 2:03 PM EST: SPX 3726. VIX 23.53. VIX pops up through the HOD. The bears got game. Ooohhh, that's right, let's goooo, Jimmy! The SPX LOD is 3723.89 so watch that. Bears have to make it fail to prove they got game. Here we go, bring her in boys for a test, SPX 3725......gap down on the minute....... don't you love the resonance off that guitar?.... bulls are battling they know the jig is up if 3723.89 fails......
Note Added 2:25 PM EST: SPX 3725. VIX 23.56. VIX HOD 23.666. It's a bloody fight. Bulls know that if they lose 3723, they are in big trouble...... this is for all the marbles today.... well, bears, do you want it or don't you?.... SPX 3726.... VIX 23.58..... the tension mounts.....
Note Added 2:31 PM EST: The stock market is hanging in suspended animation. It must decide. SPX 3725. VIX is testing the ominous HOD number at 23.666. What an inflection point. Hold on to your hat. The Fed is trying to hold that VIX beachball underwater but it is slipping from Powell's hands. The chairman digs his fingernails into the side of the VIX beachball to hold it underwater with all his might, but it keeps slipping wanting to jump higher...... boom...VIX pops to 23.71....hold on...... SPX tests, and bounces..... LOD 3723.75..... bulls are pumping thinking they got it beat.....
Note Added 2:38 PM EST: The last of the six 65-minute trading periods begins at 2:55 PM EST through 4:00 PM EST when markets close. Watch what the robots do between 2:50 PM and 3:00 PM. See if large block sell orders begin hitting the tape, or not. SPX 3726. VIX 23.58. Powell sneaks up behind Uncle Vix and sucker-punches him in the ear; volatility falls and the bulls stave off disaster holding the support at 3723, for now. It is simply a waiting game now for the 2:50 to 3:00 window when we see if the bears got what it takes.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.