Market Analysis

Panic Buying

The panic buying we’re seeing in $TSLA and $AAPL today, following the historic runs into the stock splits effective today, firms my view that we are setting up for something sinister in markets.

To be sure we live in strange times, even some bulls are capitulating giving up completely on rationalizing the Fed induced bubble price action. Today Tony Dwyer suspended all efforts to give price targets, in essence acknowledging that traditional valuations metrics no longer apply:

Unlimited upside in a risk free market that keeps ignoring everything.
And hence it should come as no surprise that the market cap expansion machine keeps creating value out of nothing:

Extended buying pure and hence we end up with charts such as this:

This is the circus the Fed has unleashed.

So let’s all acknowledge that sentiment is vastly bullish and people are piling into select stocks with no regard to risk.

I say select stocks because the internal picture keeps showing dreadful weakness underneath, even in the almighty Nasdaq:

All of which brings me to a historic irony.  Let’s recognize that the Fed has produced a liquidity machine that has pushed select indices to all time highs with most gains coming from a few tech stocks. Take those stocks out of the equation and $SPX is still flat on the year and most stocks are down on the year.

Viewed with this lens this multi month rally is not all that different than what we’ve seen in the past.

In fact, the precedence is striking in that the counter rally in the year 2000 peaked on September 1st following a furious rally in August. Sound familiar?

$SPX hit a peak of 1530 on that day as the worst was assumed to be over and optimism had come back roaring following the initial tech crash in March of that year.

But it was after September 1 that the real fun started and $SPX then commenced its long journey down that ended in October 2002 when $SPX bottomed at 798.55:

It is hence notable that $SPX is coming into the end of August and beginning of September approaching historic resistance. Indeed $ES tagged that resistance line in overnight and has sconce rejected as $NDX continues to make new all time highs:

It is the very chart I  discussed in context and detail in The Jaws:

Who knows if history is still any guide in these times. If it is then the panic buying and optimism of these days is laying the groundwork for the tears that are to follow.


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Categories: Market Analysis

42 replies »

  1. Someone on Twitter said yesterday she was getting out of the market saying the risk was too high. Jim Cramer said now is a good time to take some profits. How do you think should we play this market?

  2. Apple is trading at 8x sales, welcome to Sun Microsystems land of the 2000s. Way above it’s historical P/S ratio over last decade.

    • I was just thinking the same thing. 8 x sales. I mean, ffs. The US market is bust, and will remain so for a decade or longer. As Hussman likes to say, “it will go nowhere, in an interesting way”.

  3. This market is not working efficiently anymore. Thank the Fed. Millions of Robinhood traders will be destroyed and I guess they deserve it. Whe you think a split is a discount, then you should be annihilate by the markets.

  4. If we are back in the wild phase of the late 90ies, than TSLA will, after the split, be back at $1,000 within a couple of weeks. Dude, TSLA was $2,000 last week and it’s now below $500! What a bargain! haha… 😉

  5. Cramer tweeted that he’s taking profits in a stock. And everyone on Twitter is trying to guess if it’s apple Tesla nvidia Microsoft Facebook google Netflix AMD AMZN.

    As if only 1 of these stocks is worthy of profit taking hahahaha

    Great time to sell all.

    • Unfortunately, as with any totalitarian system, you have to go along with the trend else you will lose. This is a forced market, not a free market. You are not free to choose anymore. You HAVE to buy. The system says so, else you’re dead. Christ, that’s CLEARLY what they are trying to say to you. The boot will come down on you if you exercise any freedom or thought in this market. That is the whole point. You have to go with the flow or die.

  6. One buyer left… and Trump doesn’t even like him anymore… what happens when the Treasury or the Blackrock supercomputer quant engines the size of football fields just outside of New York that they use to manipulate this madness loses control of all this madness.

    All time highs in the middle of a pandemic, in the middle of a recession where the economy continues to moves the opposite direction of the market, and at the verge of a civil war with complete meltdown of civil government with martial rule on the horizon… who could have got that wrong if it were not a lie…

    If North Korea had a stock market, this is what it would look like.

  7. Today’s closing ramp was sold hard in the last 10mins of the session, some with money are seeing down coming. Brave bears might venture shorting AAPL with a 5% stop or, even braver, TSLA with a 10% stop – but that stock defies logic. If VIX futures weren’t so elevated I’d suggest buying them, best value look to be December and March (VXZ20, VXH21) and could be bargains now IF carnage ensues. Gold and silver are likely to drop in sympathy (collateral liquidation) if stocks crater, maybe better wait for that, besides – USD could bounce from here hurting them.

    September is the cruellest month for bulls, and very likely so this year. Be ready.

    • Well, those bets are still all good despite today’s (Wed 2nd Sept) silliness. Admittedly both TSLA and AAPL have had news in the last couple of days that is slightly negative for their stock, nevertheless they very noticably underperformed today compared with the near 1.5% blip up in markets in the face of generally negative economic news.

      Unless these two stocks regain their prior momentum I think there will be a major turn down. Of course that will happen sooner or later, the only question is when. Perhaps Sven hanging the bears out to dry on the line is a sign that this was the top?

    • Thursday 3rd Sept. Today was a start at wringing some of the excess out. No real trigger beyond things had got very, very, silly and a few folks lurking near the doors ducked out. But they can always get sillier, lol. Tomorrow’s NFPs will be boosted by about 250k temporary census workers and markets often bounce after a surprise big down day so odds favour an up day Friday – if it’s not then we should be looking a good bit lower quite fast (SPX 2800 in Oct?). Took my short term VIX profits hoping to get back in lower and later ahead of the long weekend. It’s getting a bit late in the day for Mr T, he might be thrashing around a bit more wildly soon, I like the look of December VIX futures, they weren’t much impacted today.

  8. Forgot to mention…

    Ah, the jaws. They are still in my nightmares, I fully expect SPX to reach 1800, probably before the late 2022 timeline. I don’t fear the stock movements, will happily trade down as well as up, but I do fear the implications. And so should you.

    Things are pretty sick ATM, I hope Biden wins and can begin to heal and unify USA, but it won’t be easy. If Trump wins USA will probably self destruct, perhaps that is the better long term path? I dunno, good intentions can have negative outcomes and evil intentions can have positive outcomes.

  9. The question is… where is all this liquidity going next?
    This ‘ETF bubble’ or ‘everything bubble’ will pop and liquidity will go into inverse ETFs. Buying opportunity of a lifetime.

  10. Check out the volume in the inverse ETFs in the last couple months. Billionaires or big money firms are already placing their bets and scooping up all the shares. They’re moving to inverse ETFs ahead of the crowd. Jump on board and hold tight.
    “Hold. Do not trade.”

  11. Not quite yet Sven. It’s almost ready to come apart. The volatility gets started now from a quiet steady summer rally. The next major crash to hit will be shortly after the U.S. election. Trump will win again with an even larger Electoral College win! After that we crash down to re-test the March lows. We bounce around at those levels for a while then a slow steady downward decent. There won’t be a bottom to the drops for years to come. The 20’s will not be a decade for most people to make money in the markets. Those days are almost gone.

    • Terry, did your crystal ball tell you all of that or were you relying on tarrot cards? There will always be an opportunity to make money in the market, whether on the long or short side. Capitalism will survive all of this, just lots of people are going to be hurt in the process.

  12. If the stock market corrects over the next several years. how long will it take before you break even in your 401k from these all time highs?

  13. Another of Sylvia browne’s predictions has come true now that the Fed has destroyed the free market with buying everything and printing money.

    The stock market will cease to exist in the US.
    Browne claimed that the stock market would end, adding that “IRAs, mutual funds, pension, and retirement plans” would also cease to be.

  14. All this mortgage bond buying by the Fed created another housing bubble.
    People are panic buying homes in Southern California and placing asking price and above bids.

  15. The fed did not stabilize anything this time around.
    They overshot this time.
    Everything is now in a bubble.
    Collapse imminent.

  16. Apple is now vertical. The 5g phone will be a big disappointment and the end for Apple. It will join blackberry in the history books.

    Time to find a new brand.

  17. Brainwashing complete. This false hope of fed control will keep everyone buying the dips on the way down in the coming months but it will no longer work.

    Reuters
    TUE SEP 1, 2020 / 3:22 PM EDT
    U.S. economy needs more Fed stimulus ‘in coming months,’ Brainard says

  18. Day #1………….DOW drops over 800 points. Where did that come from? Just like I’ve said before markets being pumped continue to go up…………..until they don’t.

    Stay tuned………

  19. Sold my TSLA Thursday, and got lucky as they were not included in the SP500 index this quarter. Will reload at some point at better a better price. It makes sense as why would the SP500 want a company that will most likely lose 30-70% market value over the next 6-24 months, once it is obvious that they are a car maker pretending to be a tech monster. The trouble on cornering “physics and engineering” is there is always another way to do it better, and near impossible to “tech block” and patent your way into a monopoly as it is in the “software” vs “hardware” space. For what it is worth, TESLA forced the rest of world pay attention and produce hundreds of new EVs, so kudos to Musk as he is brilliant and a true American entrepreneur…

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