Exceptional Delusion
The seminal week begins...
On Thursday last week Trump was named Time's Person Of The Year and he rang the opening bell at the NYSE. Two days later the weekend cover of Barron's declared investors should "embrace the bubble" for 2025. As I wrote recently, seldom can one have as absolute conviction of an impending crash as we have currently.
The only question on the table is will it be December or January?
Recently the market has been melting up on minimum volume and volatility. All stock rallies proceed in similar phases. This Trump election rally is no exception. First, there is the short covering phase. Remember when Chinese stocks were sky-rocketing back in October i.e. before Trump was elected? That was the short-covering phase. There was absolutely no reason for Chinese stocks to rally ahead of possible Trump re-election, however the prospect that Trump might NOT win got priced into markets for about a week. And then the short-covering phase imploded. Next there was the right-on-time "the market is broadening out phase" which was led by small cap stocks and the belief that they would lead the market higher. Soon after they rolled over in a value trap. This last phase is the narrow melt-up phase led by a mere handful of stocks representing the overall stock index amid a mass GLOBAL inflow into U.S. index and futures trades. Low volatility leads to increasingly leveraged algorithmic allocation to stocks which leads to lower volatility and more leverage. Until it unwinds without warning.
Dec. 14th, 2024:
"Since the start of December, breadth — typically measured by comparing the number of stocks that are climbing to the number that are falling — has deteriorated dramatically, even as the S&P 500 has continued to climb. That has led to something that investors haven’t seen in more than 20 years."
There has been only one other period in recent memory where the index’s breadth has been this weak for this long: heading into, and immediately after, Sept. 11, 2001"
Of course Sept. 11th was a Black Swan event, nevertheless, clearly the market was technically ill positioned for such a dramatic event. What happened next is that the market sold off brutally for a week straight as the Fed stepped into support markets. It was a massive uncontrolled crash.
Which is what we should expect right now.
Today's Black Swan event could be any of the myriad risks that are currently being assiduously ignored - most likely all of the risks at one time. The locus of collapse will very likely be overnight in Asia where one currency after another is already collapsing like a cheap tent.
U.S. pundits are calling this current happy U.S.-only market rally, "exceptionalism".
I call it "exceptional delusion".
"The Bitcoin price topped $106,000 for the first time on Sunday amid a possible clue as to how President-elect Donald Trump may put in motion creation of a U.S. strategic Bitcoin reserve upon taking office"
The rest of the world's stocks are imploding while global gamblers flow out of stocks to crowd into Trump's Strategic Ponzi Scheme.
As far as "when" the market crashes, all signs point to how soon is now?
