Since August of this year, I have not posted one word about the so-called “markets” (e.g., stock markets aka Wall Street) and with good reason. These last 14 days (thereabout) have shown precisely why, as I’ll elaborate, with a few hints of a rant mixed in just to make things interesting.
The headline to this article used to be a running favorite of mine, used many times, in different scenarios, referring to said “markets” over the years. It originates via the cleanup/restoration company Servpro® and is their well-known tagline.
So many times over the years I watched the so-called “informative” mainstream financial/business media try to explain away sudden rallies of sheer epic proportions – out of nowhere – with about as much true insight into cause and effect as if asking a toddler to explain quantum mechanics.
However, to those of us that understood true cause and effects, it was via one thing and one thing only: The Federal Reserve and its “Friends of the Fed” cadre of selected and empowered market players (think Citadel™ et al.) flooding the markets, precisely just in a nick of time, to not only save it from falling helplessly but to basically send the thing into a moonshot that would make NASA blush for speed and trajectory. Over, and over, and over, and over (did I say “over?”) again.
And that’s when I satirically started using the “Like it never….” reference because it was so blatant, so utterly obvious as to the why – it made every so-called “analyst” or show host look downright clownish when they opined at length their reasoning. (Jim Cramer anyone?)
I could go on and on about this subject alone, but there’s no need, or as I like to say, “Been there, done that, not going to do it again, that.” But let’s set a baseline, just for reference purposes, shall we?
Now during the time when then Fed Chair, Ben Bernanke was large and in charge, there was a case to be made concerning the original bailouts (and I made this case many times) that not only made sense in the abstract but also in the reality of doing them.
However, once he (Bernanke) went full rogue into ‘We’re gonna print and print more’ every time the markets appeared weak (think TALF, QE1, QE2, Don’t call it “QE” QE aka QE3, etc., etc.) it was obvious the once envy of the world for capital formation known as “The U.S. Stock Market” had been turned into nothing more than a “House That Ben Built” casino and playland for “grift-loving whales” known as “Friends of the Fed.”
Since that time there has only been one change: Management, but it has been in name (or names) only. i.e., the same policies are basically still in place – they’re just named differently. If you doubt me, just think the bailout of all the so-called “smart people” that needed to be bailed-out just this past March to the tune of 10’s of $Billions to rescue not just the banks, but all those “friends” aka “investors.”
All, I would like to point out, anathema to anything understood as “current law and/or ethics.” But hey, that’s what friends are for, right? Right?
“But Mark, but Mark!” they’ll say. “That wasn’t the Fed, that was the Treasury in solidarity with the FDIC therefore you’re wrong!”
Right, got it. However, remember I said “names?” Just who is in charge of the Treasury today? Answer: The most recent former Federal Reserve Chair, Janet Yellen.
“But that’s just a coincidence!” some will tout. “Not like this type of stuff has been going on in perpetuity.” will be the defensive posture to all criticism.
OK, points noted, soooooooo…….
Do you happen to remember way back in days-of yore when it was revealed that one Richmond Federal Reserve President Jeffrey Lacker (during Janet Yellen’s tenure) abruptly
bailed out of Dodge before any official legal charges were issued retired back in 2017 for his disclosure of confidential information about Fed policy options in 2012? Hint: The “markets” go straight up for over 5 years without nearly as much as a hiccup. Funny how that happens, yes? Pure coincidence, I’m sure.
Oh yeah, I almost forgot, speaking of ‘coincidence.’ How many other Fed Presidents have had to sudenly retire/resign since then? You know, in the last few years since, because of insider trading type stuff.
In theory – it should be a big fat zero because that’s a real no-no, and we’re told it’s not only all about the appearance of sound prudent management, but also the applied discipline for incontrovertible proof regarding ethical and fiduciary responsibility as leaders of the U.S. banking system. So this should be a no-brainer. Or said differently “I’ll take ZERO for $500, Alex.”
Oops, sorry, that would be wrong because hmmm, let me think here…
But hey, they say that’s all in the past now. Nothing to see here, move along, thanks for stopping by or “Toot-a-loo” as my great-grandmother used to say. But I digress.
Moving on back to the “markets” as of today, and why I felt the twinge to opine on such…
It was only 14 trading days ago thereabout that the entire said “markets” were on the precipice of what was shaping up to be on the cusp of complete and utter panic wave for selling as one technical factor aligned with another combining with an ever increasing barrage of reality based bad news. e.g., GDP contraction, Job reports, Treasury auction debacles, oh yeah – and the possible outbreak for WW3 in the Middle East that is still evolving.
But then, suddenly, out of nowhere came a rally that not only halted such a possibility – it has completely wiped out the entire debacle of selling over these past three months, that I argued back then, was about to take place to the screams and howls of mainstream business/financial pundit class everywhere. For reference, here’s the chart I used. To wit:
The above was my “last word” as I said on the subject and was part of my final posts explaining such titled “MYTR: Ch-Ch-Ch-Ch Changes” on August 2nd.
So let’s see what precisely happened after shall we? Again, to wit:
The above is the same chart as the former, the only change is it now shows where the “markets” traversed in the 90 days since the original post. What I would like you to take particular notice of are those two red lines at the top that highlight the original open gap left when I made my original “Best of luck” statement. Trust me, it’s of particular relevancy to where we are currently as you’ll now see. Once again, to wit”
The above is, again, the same chart only it is as of today ~10:30AM ET.
As one can clearly see, the rally over these last 14 trading days has not only halted the “markets” from going into further over-sold territory, fueling a possible “doom loop” that can run rampant in no-time. But has completely wiped the entire prior selling off clean or as Servpro® coined so elegantly “Like it never even happened.”
Again, just in case you think this is “normal.” That’s a 10% rally – non stop – in about two weeks. Again, 400plus S&P points. Why? Hint: Bad news is good news once again, meaning the Fed not only won’t hike and more, but the argument has now switched to rate cuts by March. Oh yeah, and if there are rate cuts that means more buy backs and more “Friends of the Fed” to feel embolden on any risks so just “buy, Buy. BUY!” Then buy some more. And they did just that.
CTA’s, stock buy backs and more bought so much stock in just 10 trading days it set new all time records. That’s right, buy backs and commodity trading accounts. You know what they bought? Hint: It wasn’t FAANG or FAANMG or whatever the old acronym was just months ago. No now it’s the “Magnificent Seven!” which is basically the same old seven with a new moniker. Why? Another hint: they’re the biggest buyers of stock, which is their own.
Oh, just a side note and is probably nothing – have you heard or read anywhere in the mainstream outlets that the Federal Reserve’s Emergency Bank Funding program that was supposed to be a one time one and done keeps hitting new highs in usage during all this “Fantastic?” Hmmm… probably nothing. OK, back to where I was…
Although I have no longer been commenting I have been watching the “markets” over this period of time very closely from a technical perspective. And both myself and some others who I know quite well (e.g., some of the best technical analyst in their fields, barring none) were all looking for a technical oversold bounce right around the 4100 area of the S&P 500™. Many of us speculated it could be quite forceful because so many were then too far onto the “bearish bandwagon” as they say.
But then – it not only rallied with force – it was so forceful it completely wiped the entire three months of selling off the charts in all about 10 days.
I know some very skilled traders that both manage money as well as trade their own accounts in what’s known as “size.” i.e., these aren’t glorified day traders trading their 401K’s, these are serious, skilled traders with decades of real time market trading.
And to a man – they all have been utterly shocked, stunned and their trades of this period utterly decimated (aka as wiped out) to the point of some have commented “This sh#t again!! F this, I’m done!!!”
Again, it was one thing to see these “markets” bounce on an oversold type basis. What has transpired over these last days has been anything but “normal.” Far from it.
But if you are one that still watched or reads the current rendition of mainstream business/financial analysis looking for clues – you’re told and sold – “Buy the F’n dip is back, baby!” So buy horns over hooves because that man’s got a bank of buzzers – and knows how to use them. Then again…
That’s what you were being told and sold when I signed off in August. And what happened next? Just look at the aforementioned charts and posts for clues. Which brings us to the obvious question you must be asking which is, “OK, so why all this today?”
Great question, here’s why…
I could go on and on about technicals and more. Those of you that know my work know my credentials via past analysis. Those of you that may not only need to know that I’ve held my own both against as well as with some of the best technical aficionados known to Wall Street.
And that’s not bragging for bragging’s sake, I’m just trying to set a benchmark for credibility in my thought processes. Whether you think it’s relevant is always up to you, as it should be. But it needs to be said, nothing more.
So with that laid out, what prompted me is that last chart above, and for this reasoning…
Being as succinct and concise as possible – from a purely technical analysis viewpoint – if the “markets” can not continue higher from here into year end?
You may have just witnessed the ultimate in – rise before the fall – of biblical proportions so many like to opine about that never seems to transpire. That’s where we are.
Will It? No one knows, and if someone says they do, don’t just walk but run and fast.
But again, that’s where we are from my viewpoint. Oh, and just one last point before we end here…
All through July of this year: Everyone told me what I was warning about then could not, and would not happen.
Which is precisely what did.
As always, we shall see.
© 2023 Mark St.Cyr
Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.