The NASDAQ yesterday soared out of the gate yesterday with the $QQQ once again hitting a record high.
Is the top in? I've written about this before with almost the same exact title. And each time I gave a cliff notes version....
However this time around, I think its at least worth exploring considering the price and volume action the last two days. And please don't lump me in with those uber bears who have been calling for a market crash the last 10 years.
I do think the response to this Virus is going to be what sends us into a real recession down the road and this Virus was more of a Bear Stearns moment than anything else.
my longer term thoughts are here:
Look how smart this market is... it saw this headline before any of us.
No new deaths in the Virus epicenter! How great is that.
Lets get into the action a bit shall we --
The QQQ touched yesterday... to the penny... the after hours record high price back in February.
On Wednesday the QQQ touched to the penny the regular session record high price from February.
In both cases when the QQQ hit this price it reversed course. Despite a late day buying frenzy the Nasdaq still closed down some .7%, which these days is quite a large decline. And as I was pointing out in the chat room late in the day, the market hasn't put two negative down days together in a month.
Sure enough futures are sharply higher this morning.
However.. notice who is lagging? The Nasdaq 'limping' to a .3% start to the day, while Airlines, Financials, and travel continue their massive squeeze higher.
Coupled with yesterday and Wednesdays double top'esque price action comes some unusual volume on the Nasdaq as well as overall call volume. Record volume on the NASDAQ yesterday, while price comes exactly to a former record high and fails...
Something changed in the market today. I don't know what it was but that was the highest volume for Naz in at least 5 yrs which includes all those quad witches. And the March plunge. pic.twitter.com/eG3mlrZVeh
— Helene Meisler (@hmeisler) June 4, 2020
— SentimenTrader (@sentimentrader) June 5, 2020
I feel a bit like Zerohedge here. Because I'm going to say... maybe its nothing. And maybe that is the case... really. Calling tops in this market the last 10 years has been like calling for the Knicks to make the playoffs... or heck.. even win a game...
But clearly something was a little off yesterday. No doubt. And the leader from the lows of March has been tech. The airlines and financials are late to the party.
Some of the tech names that have gone bonkers... the $W, the $CVNA, the $SHOP, the $ZM, the $TWLO are all off their record highs, be it from this week or last.
Throughout the bull market from the 2009 lows until we hit out record highs in 2020, volume has usually been light. And yet we tapped record highs and record volume and reversed.
A double top is one of the easier formations to spot. And even yesterday before the QQQ gave it in, the price action put in a similar looking double top.
We know how this market has been operating. Dips are getting bought. Price action that looks weak is made to look strong overnight. The FED and every Central Bank, including the ECB with their huge announcement yesterday morning, are throwing as much money at the markets as they ever had.
The billions in 2009 are trillions in 2020. If $7+ trillion doesn't move the needle on the stock market, I don't know what will.
Notice what has been moving the markets. Fear... worry.. concern... Heck the entire country was on fire and S&P500 futures rallied almost 2% overnight.
This marker doesn't care what you think or feel. It's the terminator.
What happens if this Virus just disappears? We've had hundreds of thousands of people out the last few weeks. Cases aren't spiking. The epicenter of the Virus has seen cases dropping like the airlines were a few weeks ago.
The good news would actually be bad news for the markets. The reality is... how much longer can the central banks keep this up? If the economy actually gets on its feet and for the first time since the early 1980's inflation starts to pick up... what is the FED to do.
The Central Banks have been operating in a fairy tale land of no inflation. This entire asset price protection scheme burns to the ground if inflation rears is ugly head.
I know... this Virus is deflationary. I know the FED needs to bring rates into negative territory. I know.... we are doomed to a Japanese'esque stagflationary existence. But what if.. all these trillions of $$$ finally seep into the real economy. Yes not just artwork, collectibles, or summer homes in the Hamptons. The real economy.
One tiny little example is the shippers yesterday raising fees on shipping. Very tiny I know. But also look at what the Virus did to wages. Companies were raising wages for workers. Higher wages... higher costs... that's all trickle up as in higher prices. Higher costs = higher prices. More money circulating in the system = higher prices. What does that mean for interest rates? I think we are going to find out. Already longer term rates are on the rise.
Look at the recent break on the 20 year bond etf.
Short term rates have yet to rise as the central banks, like the ECB are focusing most of their efforts there.
ECB Fronting Up the Truck!! pic.twitter.com/GpO3tVFNgk
— UPBOptionMil (@UPBOptionMil) June 4, 2020
and so here we are.. the jobs report just came out. A HUGE BEAT.
I think its one nail in the coffin for the Central Banks continued unlimited support. You can't justify massive stimulus amid an economy that is clearly recovering.
Bonds are getting crushed. And the implication longer term is money will not be as cheap.
This market loves cheap money.
What happens when money isn't so cheap anymore?