Did Yellen get out just at the right time? Hindsight is always 20/20, but clearly the market is saying it's romance with Yellen was more than QE deep. Sunday night stock futures were roaring to fresh record highs, this morning the market is crumbling with DOW futures down over 200 points. Of course 200 points in 2018 terms is not as ugly as 200 points in 2009, but its still something we haven't seen often over the last two years.
It was February of 2016 when the market finshed its last correction. At the time top callers and market pundits were busy calling the top for the market. Sentiment for the $SPY hit a never seen before low on stocktwits.
From @StockTwits I can't recall seeing $SPY sentiment this bearish before pic.twitter.com/AI94fWDdsU
— UPBOptionMil (@UPBOptionMil) February 11, 2016
and after two years of a furious and relentless rally for the stock market sentiment flipped almost upside down, or right side up, because up is right and down is wrong when it comes to Central Banking ->
and two years later almost 180 degree flip pic.twitter.com/i5KYSuGjDQ
— UPBOptionMil (@UPBOptionMil) January 8, 2018
In a market that has gone up pretty much every month for two years, sentiment would invariably have to rise. Either the bears would run out of capital, or the bears would turn bullish. And when everyone is bullish everything is awesome.
Corporations are busy handing out free cash bonuses to their employees to celebrate the looming massive inflation of the national debt. Stock investors are now faced only with deciding just how much capital to allocate to each long position, as the Central Banks have forced everyone who isn't dumb enough to actually want to save their money, into risky assets.
It's a veritable utopia!
And as I've said over the years, as much as you might despise these Central Bankers, even Ben Bernanke himself has been mighty clear on forcing everyone, even your 80 year old Grandma who thought she could survive on interest payments from the savings she worked her entire life for, into risky assets.
Years ago, Bernancke himself said those being victimized by the low savings rates, as a result of the FEDs actions, will be rewarded down the road. Their sacrifice will be worth it. Of course the only true beneficiaries to the Central Banks actions have been the rich, who have seen their assets explode in value. The middle calls and poor, who aren't on the executive boards of 5 different companies, deciding the excessive compensation packages of their CEO buddies, have been left struggling to get by. And what's worse, with the massive debt bubble, built on the back of 9+ years low interest rates, looking to deflate, those savers who have been sacrificing all these years for the good of the country, will be the ones on the hook again bailing out whatever institution comes begging for a bailout this time around.
And one last thing. I am not calling a top for this market. But I do think the cracks have formed for that long awaited pull back.
Now off the soap box.
That Nasdaq head and shoulders I pointed out yesterday is coming to fruition this morning.
The S&P 500 still looks vulnerable. And despite the tremendous earnings reports from the likes of $AMZN, $NFLX, and $BA this week, the market is telling us, much like this massive debt monster the Central Banks have created.... it wants more. And more... And More..... and more....
Despite the move lower, clearly it is still a bull market. Being a bear still sucks. The insane rips off the lows... even yesterdays action.. It just sucks being a bear. and I'll leave you with that.
Have a great weekend!