What I really like about our Straight Talk episodes is that it they are completely agenda free, there are no restrictions, it’s just the 3 of us talking and discussing the issues on our minds. What you see is what you get. Our honest opinions. You may not agree with us and that’s completely fine, but these discussions are meant to highlight fact based topics that we care about discussing them in a hopefully intelligently and digestible manner, make others think as well and hopefully educate in a setting that permits us to go into a bit more depth.
Many market discussions are agenda driven or constrained by time. Speaking for myself I also learn things during these discussions and I very much enjoy the banter we have going.
In this week’s episode of Straight Talk Guy Adami, Dan Nathan and I are diving into the debate of bubble vs mania, the difference between the two, we speak about the new retail phenomenon, the risks associated with it, we touch also the political influence on markets via headlines. Some people do not like us to touch upon the political and we get that, but one can’t deny the influence the political world has on markets and in our view it would be neglectful not to address their influence on markets and to highlight what’s real or not from our perspective. Again: Anyone is free to disagree with our views and we all have different ones, but as Guy said this week: Civility is a sign of strength not of weakness and Dan’s appeal for civility is a much needed in our age where people hate on each other for having different opinions.
We also discuss some technical charts and issues of valuations and for context see also my appearance on CNBC Fast Money this week:
Thanks @MelissaLeeCNBC & @CNBCFastMoney for having me on the show.
Well, at least you know where I stand 😉 https://t.co/UZNuPceDAO
— Sven Henrich (@NorthmanTrader) June 17, 2020
Yes I know, old pic prior to quarantine buzzcut, one day we’ll update it perhaps 😉
One of the issues I mentioned on the show was the fact that in the past few years market moves have become ever more extreme, to the upside as well as to the downside. In the meantime volatility has moved from one compression pattern to the next and ultimately it breaks out. Same with the rallies, they extend higher and higher on ever tightening patterns and then at some point they snap violently:
We just had such a snap in the past 2 weeks and this week’s Fed driven (Corporate bond buying) rally could not repair that damage.
Underlying it all is the again a very pronounced lag in equal weight and, as you can see in the chart above ($XVG), equal weight is hovering around the December 2018 lows when $SPX was trading around 2350.
Hence we also discuss the banks, Wells Fargo, JPM, and the signals they may be sending about the larger economy.
And it may be an ominous one. Yes central banks, with never before seen liquidity injections that make 2009 look like child’s play, have managed to levitate asset prices to unseen valuations inside a recession. Yet there are major divergent issues going on in these markets including the over reliance on price gains coming from overnight gaps to the upside, many of them unfilled and we discuss these as well.
Hence let’s not lose sight of history which suggests what would/could happen if central banks lose control:
Wild if true.
Global Dow Jones index.
Largest liquidity driven bear market rally since 1929 creating the largest asset bubble inside of the worst global recession in decades.“If” central banks lose control history, fundamentals and technicals suggest new lows coming. pic.twitter.com/YZLTVCpRZ7
— Sven Henrich (@NorthmanTrader) June 19, 2020
Control over the virus could prove to be an illusion as cases are increasing to ever higher levels and many states in the US are seeing record spikes, hence $AAPL again shut down its stores in key states. A “V” staped recovery presumed by markets at these valuations may disappoint in size and scope and then what do we have besides a historically disconnected in asset bubble?
No, the risk factors may be currently ignored by liquidity soaked markets, but reality keeps knocking at the door and one day may suddenly open it.
Without further ado here’s this week’s episode of Straight Talk and we hope you enjoy it:
Separately, for those interested, I’ll be posting a detailed rundown on the latest market technicals. If not already subscribed you can register here: Market Videos.
For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.
All content is provided as information only and should not be taken as investment or trading advice. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. For further details please refer to the disclaimer.
Categories: Market Analysis, Opinion, Straight Talk
Another excellent presentation !!!
Ditto
Sven, I agree with you this a gigantic bubble. What I don’t understand is that you only see downside risk to 2600….
You are doing a great service doing these. Thanks!
Jerome Powell: “don’t hate the player, hate the game.”
#BanksAtRisk
#ZeroReserveRequirement
#ZeroInterestRates
I just wanted to pop in to thank you all. I have SO much appreciated listening to folks with so much more experience than I have…at a price I could afford! 🙂 Thank you!!!
Sven, call the top.
Nasdaq COMP 10,086.89
SPX 3,393.52
DJIA 29,568.57
All historical (ie. passed)
Agree
Thanks for the commentary. Unabashed honestly relative to the US President, govt. orgs., congress, and Fed. The current and future fundamental economic data does not support the current/expected mkt. levels. Stress indices, industrial production manufacturing & services, unemployment (BLS “error” by +3%), … all “hughly/bigly” DOWN, GDP for Q1 at -5% (NYFed) to -15.26% (STLFed) and Q2 est. at -19.03% (NYFed) to -45.5% (AtlFed) also “hughly/bigly ugly”. There is NO WAY a real V recovery is in the cards, it is all COMMENTARY/JAWBONING. The investing “community” is in for huge beautiful surprise (terror).
Equal weighted underperformed versus the DIA, SPY, QQQ and XLK primarily due to the weightings of Microsoft and Apple. But now that Microsoft and Apple appear to have both hit new highs on negative divergence on both the daily and weekly charts, it could be downward from here.
In William O’Neill’s book, it mentions that networking stocks are the last to top in a bull market. The PXQ networking ETF just hit a higher high on negative divergence on the daily and weekly charts. 1994 here we come.
It’s worth watching Sven’s ‘realvision-1019’ video on the About page of this site. Compare Fed, debt, then and now. Of course no virus back in Oct, but the other systemic problems are still with us.
May we live in interesting times. Wait… oh, we already do. Thanks.
Monseiur Sven , extraordinary meticulous superb work !!! A money 💰 technical machine !! my deep eternal gratitude
Monseiur Sven, unquestionable meticulous assessment you scrutinize data you a technical money 💴 machine…merci
Good stuff Sven. Don’t listen to these Robinhood ‘bulls’ that do nothing more than cheer lead on these increasingly socialized financial markets. It’s not going to end well for them.
Not a good sign…with all the new highs being hit by all the FAANGM stocks, only AMZN and NFLX are hitting overbought levels in the last 10 days on the 1 hour chart. Distribution is taking place (secretly) as the market goes up. “Don’t be left holding the bag.”
Bubble? More like a civil war we’ve now gotta look forward to….
Euphoria is the one percent. Despair the other 99% Eupthoria is the Robinhoodies who are are so desperate when they get their ridiculous little $1200 cheques then for a few weeks move from Fortnite Battle Royale to the market, because they don’t give a damn – they know already it is Monopoly money and a government stunt, so, hey, lets just play with it. Despair as old market makers of repute realise the market has been destroyed, no price discovery, extreme manipulation from the media to the Treasury General Account using trillions they conned Congress into giving to play the market, the Fed backstopping bad companies and bad management that should have been freed to the market for reorganisation.
So a civill war becomes inevitable. The Second American Civil War. Nothing to do with the current stuff going on, its just a trigger and reflects the greater inequality and general discontent, after Covid popped the first balloon of a big bunch. It certainly did not cause this mess. Everyone knew before we were already well beyond borrowed time. Hell, probably still in the last “Great Recession”, despite the artificial stock numbers created by QE1, QE2, QE3, QE4, Fed pirouettes, various ballets, Repo Market interventions, etc, etc, etc….
To make matters worse, the powers that be may try to start an international hot war too to divert attention from the Civil War.
Trump will first try stop the elections. Then if he can’t he’ll fall back as before in attempting to rig them, although he’s pissed off the prior meddlers who helped. Then if he fails at that, he will call the election a scam. That’s why he already started with his postal votes stuff, maybe some truth in that but generally unlikely. Next he will find all sorts of “legal” reasons to “sue” and annul the outcome in key states. Everyone knows what he’s like, even those that voted for him – that’s why they did! Two fingers to the system. Even ‘I thought it a lovely grand joke at the time.
Civil insurrection will mount. He’s not really a Reblican at the end of the day anyway. They just got on the bandwagon for the free money or their various causes and thought everything they wanted was all going to drip down to them – mistake! For his base, at least.
Civil War. The Second American Civil War. On top of that perhaps a hot international war, or close on such? – That will really kill supply chains. Apple then? Tech then? Lucky to have food….
A president who would be happy to start a civill war if not a nuclear war just to win an election and be worshipped as King, representing nobody in the end other than himself?
Why did Smith & Weston make among the best stock market gains last week? A small part of the market maybe still works!!!!!!!!!!!!!!!!!!! But, hell, one company – and one most sane people really wish didn’t exist?
PS – Guillotines work really well. The French regarded them as a humane and modern manner to deal with the problem, ie the nobility. Stocks at all time highs, the economy *******. Let them eat cake? L’etat ce’st moi? Not that they are much better than guns at the end of the day, but guillotines do the same thing. That we have come to either or maybe both in a way shows the failure of our current systems and those who lead them, of whatever stripe.
Almost EVERYONE is really pissed off now. All sorts outside the 1%. Probably even the kids of the rich. When that happens everyone goes at everyone else, everyone shoots at everyone else, everyone rebels against everyone else. Desperation breeds discontent.
The Fed only supports the 1%, as does the government of all sides all in all, and Wall Street and Silicon Valley is happy to carry on ******* them and the rest of us all too in the meantime too. What a bloody mess. No free market left. Capitalism killed. Our social mores of equal opportunity, equality before the law, an ability to become part of the greater good for the good of all gone? Covid showed how good society can be, the Fed and its funny money together with power hungry absolutist governance how bad its all become.