מדד S&P 500שורט
Stocks/Macro - SPX Blowoff Top of the Debt Bubble
מעודכן
Idea for Stocks:
- I think we will decline to Q2 2022 at the least.
- IMO, Market participants have completely misjudged inflation expectations and currency devaluation and mispositioned. Market seems largely positioned for goldilocks/reflation, inflation and growth, but nothing could be further from the truth. Inflation fears will not be talked about in 2022.
- Therefore, the next reflexive move will be volatile. We are likely to have a significant drawdown by EOY.
Systemic Liquidity:
- Credit contraction has already begun. Monetary tightening began long ago, and QE tapering (which is undeniable tightening) is about to begin. It is credit inflation which drives both risk asset prices and inflation, while systemic liquidity flows are the transmission mechanism. These things are declining and have been for a while.
- TGA Balance is now at pre-covid levels (inverse of TGA is correlated with equities, as this is a source of liquidity of the Fed), as well as RRP over
1T, to mop up liquidity (no credit is created based on that).
- China's Credit Impulse peaked in Q3 2020, making a double top (surprise surprise), and turned negative in Q2 2021. CCI takes about 4Q for negative impact of outflows to impact the market + economy.
- Which lead to a quarter later, C5 Central Banks' balance sheet flows (growth rate) peaking. These liquidity outflows have a 3Q delay in affecting Core PCE (inflation) + equities.
- CCI + C5 Central Bank Balance Sheets liquidity flows (2nd derivative):
- QE Taper is expected to end by mid 2022, and interest rates are expected to be raise then, which coincides with Q4 delay of CCI turning negative. Interesting how everything is timed together, perhaps Fed want to appear in control, when this was pre-ordained more than 4Q ago.
Macro Drivers:
- FB misses revenue. Snap drops 30% after earnings. Growth to decline and tech misses to be a trend.
- FOMC and NFP upcoming, taper likely to be announced for November or December.
- Market is also continues to pull forward the pricing in of rate hikes, starting in 2022.
- Many, if not all market components are at their 100D 2 Std Deviations:
- Small Caps, have not broken out but rather likely to test the lows next:
- Oil will likely pullback, and experience a glut in 2022:
- Copper, early double top, and likely to lead down:
- Gold, Wyckoff Distribution. Sorry, but there will be no hyperinflation and USD will not devalue for the time being:
- Crypto, the futures ETFs likely marked the top. Negative roll yield will kill the price for a few years:
- Credit, never really confirmed any high but remained at lows:
- Yields, real rates will do a headfake and reverse, while sentiment seems to be that treasuries will collapse. On the contrary, I think treasuries will likely be the best performing asset class for the next few years:
A good top signal is when DXY, VIX, front month VX has positive correlation with equities, which is happening now.
- DXY refuses to decline and found a base for the next leg up:
- VIX + MOVE. Volume stopper on 100D -2 Std Dev, high degree of spread with front months and with UST vol. We're waiting on the yields reversal and bond options traders have already predicted it. Transmission mechanism to equities UST -> MOVE -> VIX -> ES. Likely to recapture this support and re-test the highs. We will soon get to the promised land of VIX compression unwind:
Market Pulse:
- Pension fund allocations are largely over, as well as tech earnings to end this week + the stock buybacks. Real earnings yield is negative.
- Bearish seasonality of Oil, which largely has been driving the market.
- In this last stage, the gamma squeezes in TSLA seems to be driving up the markets, but obviously this isn't to last.
GLHF
- DPT
- I think we will decline to Q2 2022 at the least.
- IMO, Market participants have completely misjudged inflation expectations and currency devaluation and mispositioned. Market seems largely positioned for goldilocks/reflation, inflation and growth, but nothing could be further from the truth. Inflation fears will not be talked about in 2022.
- Therefore, the next reflexive move will be volatile. We are likely to have a significant drawdown by EOY.
Systemic Liquidity:
- Credit contraction has already begun. Monetary tightening began long ago, and QE tapering (which is undeniable tightening) is about to begin. It is credit inflation which drives both risk asset prices and inflation, while systemic liquidity flows are the transmission mechanism. These things are declining and have been for a while.
- TGA Balance is now at pre-covid levels (inverse of TGA is correlated with equities, as this is a source of liquidity of the Fed), as well as RRP over
1T, to mop up liquidity (no credit is created based on that).- China's Credit Impulse peaked in Q3 2020, making a double top (surprise surprise), and turned negative in Q2 2021. CCI takes about 4Q for negative impact of outflows to impact the market + economy.
- Which lead to a quarter later, C5 Central Banks' balance sheet flows (growth rate) peaking. These liquidity outflows have a 3Q delay in affecting Core PCE (inflation) + equities.
- CCI + C5 Central Bank Balance Sheets liquidity flows (2nd derivative):
- QE Taper is expected to end by mid 2022, and interest rates are expected to be raise then, which coincides with Q4 delay of CCI turning negative. Interesting how everything is timed together, perhaps Fed want to appear in control, when this was pre-ordained more than 4Q ago.
Macro Drivers:
- FB misses revenue. Snap drops 30% after earnings. Growth to decline and tech misses to be a trend.
- FOMC and NFP upcoming, taper likely to be announced for November or December.
- Market is also continues to pull forward the pricing in of rate hikes, starting in 2022.
- Many, if not all market components are at their 100D 2 Std Deviations:
- Small Caps, have not broken out but rather likely to test the lows next:
- Oil will likely pullback, and experience a glut in 2022:
- Copper, early double top, and likely to lead down:
- Gold, Wyckoff Distribution. Sorry, but there will be no hyperinflation and USD will not devalue for the time being:
- Crypto, the futures ETFs likely marked the top. Negative roll yield will kill the price for a few years:
- Credit, never really confirmed any high but remained at lows:
- Yields, real rates will do a headfake and reverse, while sentiment seems to be that treasuries will collapse. On the contrary, I think treasuries will likely be the best performing asset class for the next few years:
A good top signal is when DXY, VIX, front month VX has positive correlation with equities, which is happening now.
- DXY refuses to decline and found a base for the next leg up:
- VIX + MOVE. Volume stopper on 100D -2 Std Dev, high degree of spread with front months and with UST vol. We're waiting on the yields reversal and bond options traders have already predicted it. Transmission mechanism to equities UST -> MOVE -> VIX -> ES. Likely to recapture this support and re-test the highs. We will soon get to the promised land of VIX compression unwind:
Market Pulse:
- Pension fund allocations are largely over, as well as tech earnings to end this week + the stock buybacks. Real earnings yield is negative.
- Bearish seasonality of Oil, which largely has been driving the market.
- In this last stage, the gamma squeezes in TSLA seems to be driving up the markets, but obviously this isn't to last.
GLHF
- DPT
הערה
At the end of volatility compression cycles, there can be little diversification as all risk assets become positively correlated. I think we are seeing that now.הערה
This is the kind of strong signal that you get rarely:הערה
Update on Macro Drivers:- Atlanta Fed Nowcast model down to 0.2% annual rate for Q3 real GDP
- (-1.8%) for real final sales.
Likely that GDP rate will turn negative in 2022, and downward revisions will become a trend.
Bank of Canada accelerates tightening by pulling forward rate hikes, and stops QE cold turkey.
US Treasury yields at the long end of the curve took a nose dive today, catching inflationistas by surprise:
Just getting started.
הערה
Update on Credit:- HYG/LQD ratio is probably of more importance than nominal values for SPX price. LQD may even see a resurgence along with Treasuries:
הערה
TSLA, GOOG, and MSFT had massive gamma squeezes today while market components sold off during SPX being flat:Think about it this way. Gamma squeezes to the upside are caused by a large purchase of calls (where the MM has to hedge). While there are buyers, someone is selling these calls. This is what creates blow-off tops.
הערה
FYI: Atlanta Fed GDP estimate for Q3 was around 6% two months ago and 14% in May. 14% -> 6% -> 0.2% with "trillions" of "money" "printed" and "inflation" to stimulate the economy, raising Federal debt to GDP to 128% (from 50% in 2000).Credit contraction already confirmed via global credit impulse, QE Tapering and fiscal cliff is to be complete in 2022, with the possibility of rate hikes.
If there is zero-negative growth, and companies can no longer leverage up their balance sheets for stock buybacks and manufacture EPS, where is the money coming from?
הערה
Eurodollar futures taking a nosedive at the long end, and front end starting to roll over, pricing in interest rate hikes. This is bullish dollar initially, bearish on long end of the yield curve, likely to flatten the curve further:הערה
After RBA unexpectedly refused to buy their own government's bonds, Australia's 2 year bonds experienced a 5-sigma move:Their yield curve 2s30s:
Australia as known as the EM poster boy of the world for inflation.
הערה
US 20s30s inverts:הערה
U.S. GDP at disappointing 2.0% in Q3 vs 6.7% in prior Q2, missing the estimate of 2.7% by 0.7%.DXY reverses and recaptures the trendline. It was a little bit suspect that it would reverse without a credible punishment of dollar bears and before the -2 Std Dev:
AU02Y with a >10 sigma move:
AU 2s10s
AMZN, AAPL and SBUX down 5% after misses and bleak outlook for sales and growth.
Fed next week, I would not be surprised by a choppy top and mean reversions until then.
הערה
Long TIPS down 4.2%, Long bonds up:Inflation baby!
הערה
IMO the "Energy Crisis" is largely over:It was never about US demand, but driven by fears of a European crisis, and speculation.
עסקה פעילה
This is it :)Tapering has officially begun. Blow-off top at SPX 4666.66:
הערה
It's not a "signal" but Financials look like right before the 2020 crash. Collapse in yields and rising dollar would hit them:הערה
Systemic LiquidityCCI leads Risk assets by Q4. Major drawdowns in SPX have followed CCI peaks by Q4 (CN30Y responds immediately to CCI):
עסקה סגורה: היעד הושג
10% down from the top, through supports not seen since 2020 - I think it's safe to say I am right."To spot a bubble in advance requires a judgement that hundreds of thousands of informed investors have it all wrong "-Greenspan, 1999
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