Market Analysis

Crushed

By on • ( 12 Comments )

So they crushed the $VIX again as volatility has entirely disappeared and the never ending rally keeps on ticking high relentlessly.
Welcome to every big rally in recent years that all ended in a spanking in one form or another other. This rally of course the most liquidity drenched in history having seemingly vanquished all 2 way price discovery.

Yet, because and despite of all this, the $VIX patiently informs of another big spike to come. I’ve talked about this since the beginning of the year and followed up on the evolution of the structural $VIX chart.

Most recently here:

Notably, despite the non stop rally in recent weeks, the structure keeps holding in an impressive fashion and in context this chart combination is notable:

Not only does the falling wedge pattern continue to hold precisely, but for now even the uptrend from the 2017 lows is holding. Could it break lower? I suppose so, but note the $SPX $VIX ratio has once again reached extreme low levels from which sizable volatility spikes have occurred in recent years now matching the lows we saw back in late 2017 early 2018:

Fun fact: Investor flows appear to now be just as optimistic as then according to the Ameritrade IMX index:

Even on the daily $VIX chart we see structure bubbling again:

None of this unfortunately gives us the day and the time, but it informs us that another volatility spike will come, and perhaps first just another smaller one into the 20’s. But the larger structure continues to build very cleanly and it looks very powerful suggesting something much more sinister will come. 50? 60? 70? 100? Only time will tell.

In the meantime the Fed continues to insist on exacerbating everything from asset bubbles to wealth inequality while the larger rally continues to weaken underneath as it has many times before a larger volatility spike has commenced:

For further detail please see the boarder market analysis I put out this weekend in Reality Check:

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Categories: Market Analysis

12 replies »

  1. Sven, you keep hammering on about the Fed, but they don’t buy stocks, do they? Nor do they give free money to people so that they can buy stocks. It’s investors bidding up the markets, and it’s investors who will suffer when the bubble bursts. Don’t blame dumb investment decisions on Fed policy.

    Reply

    • Mark,
      I think I can safely assume that you are a youngster that, like all of the youngsters that have never ever seen a serious market correction, has not heard of the PLunge Protection Team. The PPT. Been n operation for decades. Last count I saw a long time ago, was 3,000 traders working at the FED’s N.Y. building. The best kept secret in the market. Obviously with unlimited free money created, per Mr. Powell, out of nowhere from nothing. It, the churn they are running, will go on until it gets a whack.

      Reply

      • When the FED does QE it is the same as synthetically buying the SP500 they digitally print money [out of thin air] then the FED takes that new money and buys treasuries. The sellers of those Treasuries are usually institutions [who have to be invested] then turn around and buy stocks with that money if they are selling bonds. So not only is QE the same as synthetically buying stocks it also increases the money supply [which is inflationary!

        Reply

  2. Remember what JP (Powell) said never sell America !! I been out of this market since April!
    A Jewish Proverb- “ what wiseman do early fools do late “ –

    Reply

  6. “Reality Check” is another brilliant piece of analysis by Sven. And the Fed has been behind every economic contraction (save March,2020) since 1913. In a nutshell, what the Fed is doing is based on the nuttiness of Modern Monetary Theory bought into by its young academic staff. The notion, in part, is that you can indeed monetize the overwhelming national debt by systematically debasing the dollar so long is it remains the reserve currency of the world. And so long as this holds, you never need to pay back the debt. 1920’s Wiemar Germany anyone?

    Reply

    • YES!!!
      Confirm Sven’s SUPERB analysis work and thanks to him for sharing with us unwashed masses.
      What is going to be of KEEN interest is the response of the gold market to the Weimar style inflation that has been unleashed. Obviously with the BIS and bankster pals smacking it down on a regular time line, as there can be NO alternatives to the sanctity of the USD reserve currency status.

      No doubt the fact that the central banks of the world and China are loading up on gold is not relevant, except to people that under the role of the store of value for 5,000 years. .

      How the banksters can escape from the Zero interest rate environment where THINGS, houses, land, stocks, old cars, computer generated B.S. paintings are worth more than money is astounding, but where we are and the end game of every past bubble has ALWAYS been the same.

      “Men it has been well said, think in herds; it will be seen that they go mad in herds, while they only regain their senses, slowly, one by one.”
      Charles MaacKay, Book: Extraordinary Popular Delusions and the Madness of Crowds.
      Published in 1841!!!

      Reply

  7. Just so you know, you heard it from me first……………Trump will be re-instated back into office no later than this Autumn! This will happen incredible as it may seem!

    Reply

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