Analysis Topic: Stock & Financial Markets

The analysis published under this topic are as follows.

Sunday, August 29, 2021

Stock market risk not yet realized / Stock-Markets / Stock Market 2021

By: Gary_Tanashian

Stock market is at high risk, but…

The ‘but’ is the old saying “markets can remain [seemingly] irrational longer than you can remain solvent” if you fight a trend that is intact at any given point. Since March, 2020 that trend has been up.

Structurally Over-bullish

Below is a chart showing the 10 week exponential moving average of the Equity Put/Call ratio (CPCE) that we review periodically in NFTRH for a view of the structural over-bullish situation in stocks. I write structural because it has extended much longer than extremes in the CPCE have done at previous ‘bull killer’ danger points, after which risk was realized in the form of moderate to severe corrections.

The trend began logically enough at a ‘bear killer’ reading in the midst of max pandemic fear. We noted at the time that market participants were not just bearish, not just risk averse, but absolutely terrified. So the recipe is this: take 1 lump of terrified investors, add a heaping helping of the Fed’s money printing and voila, enjoy the taste of a slingshot rally that is very filling despite its inflationary odor.

Sunday, August 29, 2021

Play the Odds: Avoid Gambling in Rigged Markets / Stock-Markets / Financial Markets 2021

By: MoneyMetals

Is America becoming a nation of gamblers?

The lure of potential cash windfalls is driving rampant speculation in financial markets and record traffic to casinos.

The commercial gaming industry generated a record $13.6 billion in revenues during the second quarter, according to the Las Vegas Review-Journal. Casinos in Las Vegas, Massachusetts, Louisiana, and elsewhere now expect 2021 to be their best year ever.

On the flip side, since all games on a casino floor are rigged in favor of the house, it’s a good bet that gamblers are losing record amounts of money.

Saturday, August 28, 2021

Stock Market IWM Sets Up Dual Pennant/Flag Formation – Suggesting Very Volatile Apex Even / Stock-Markets / Stock Market 2021

By: Chris_Vermeulen

Recently, we’ve seen an extended sideways price trend in the Russell 2000 sector that started in February/March of 2021.  The peak price level on the IWM, the Ishares Russell 2000 ETF, reached $234.29 and has consolidated in a sideways price range for more than five months now.  In mid-July, IWM broke lower and established a fresh new price low of $209.05 – setting up a second Pennant/Flagging price formation (in YELLOW).  We believe this extended sideways Pennant/Flagging price channel is setting up a major volatility event (breakout or breakdown) as the price continues to near the Apex.

Dual Pennant/Flag Setups Suggest Big Volatility On The Horizon For Traders

We’ve drawn the longer-term Pennant/Flagging channel in CYAN and the more recent Pennant/Flagging channel in YELLOW.  What we find interesting is that price is certainly attempting to break free of this channel recently but has continued to be constrained by a lack of directional momentum.

Thursday, August 26, 2021

Investing During Stock Market Uncertainty / Stock-Markets / Stock Market 2021

By: Nadeem_Walayat

This is a continuation of my recent extensive analysis in advance of Financial Crisis 2.0 as a handful of stocks are driving the indices higher, Apple worth $2.3 trillion, Microsoft $2 trillion, Amazon $1.8 trillion, Google 1.8 trillion, Facebook $1 trillion even that over priced pile of poop Tesla came close to being valued at $1 trillion, we are definitely in a bubble, you only need to go onto youtube and watch the to the moon videos of Cathy Wood, literally everything's going to go to the moon because her barely out of puberty Quants decree it to be so. This is clearly a major warning sign of a unsustainable trend when indices are ruled by such a small clique of tech stocks where the greatest similarity is with the dot come bubble in terms of the valuation of stocks that actually produce revenues unlike the largely worthless dot com's of that time.

Thursday, August 26, 2021

Stock Market Rally On – Price Range Continues To Narrow As Reflation Trade Flags Out / Stock-Markets / Stock Market 2021

By: Chris_Vermeulen

After a week of moderate volatility, while Consumer Sentiment and other economic data surprised traders/investors, the US markets entered a strong rally phase early in trading on Monday, August 23, 2021.  This suggests traders continue to buy the dips in expectation of a never-ending rally trend.

Bucking Consumer Sentiment Trends

While the US markets continue to trend higher, some of our custom indicators and modeling systems have recently warned of market weakness setting up in cross-market sectors.  Additionally, last week, the foreign markets took a bit of a beating while general commodities moved decidedly lower.  Overall, it is tough to argue with this upward price trend – even while other indicators suggest intermediate market strength may be weakening.

Tuesday, August 24, 2021

Surprising Consumer Activity Suggests A Deeper Shift In The Finanical Markets / Stock-Markets / Financial Markets 2021

By: Chris_Vermeulen

This final portion of our research article into the shifting US/global consumer spending/economic activities will help to set up forward expectations related to how assets and the stock market may react over the next 12+ months.  In our opinion, the reflation trade/rally is complete, and consumers have already run the course with regards to stimulus spending, hyper-speculation of assets (cryptos, commodities, equities/stocks, and others).  What happens next is we shift into the real-world future where post-reflation valuations, consumer activities, and corporate earnings will drive expectations.

There was a time, shortly after the November 2020 elections, that was very opportunistic for traders/speculators.  The US Fed was prompting very easy monetary policy while multiple stimulus programs were still taking place.  Additionally, the US economy was still early into the post-COVID reflation attempts.  This created a real opportunity for traders and speculators to ride a hyper-speculative rally phase in late 2020 and into early 2021 as the Month-over-Month and Year-over-Year economic output data ramped up from the extreme COVID lows.

Monday, August 23, 2021

Stock Market U-Turn and Quite for Real / Stock-Markets / Financial Markets 2021

By: Monica_Kingsley

What doesn‘t go down, must go up? With a little Kaplan help, sideways S&P 500 trading well above 4,370 – 4,375 area spurted higher as the taper prospects rebalancing worked its magic. As I had been writing thoughout the week and well before, mathematics of growing deficits doesn‘t favor decreasing asset purchases. On top, the economy appears a little slowing down – while no recession this year or next is likely – we‘re midpoint in the expansion cycle as per my credit spread indicators – the slowdown looks inevitable, and the only question is the extent and seriousness of any Fed tapering.

The talking has thus far lifted the dollar, enabling the central bank to take on inflation through the back door. Combined with the decreasing margin debt (first sign that something with the M2 rate of growth is amiss), the reflation and commodity trades have suffered, and all it took was a mere 2.5% from S&P 500 ATHs to make the Fed blink as per the title of my prescient Friday article.

Treasuries though aren‘t yet convinced, having merely wavered – they‘re overestimating the odds of economic growth turning negative. The same trading action describes the dollar, and inflation expectations dipped on the day as well. As a result, expect the turn to risk on beyond stocks, to continue in fits and starts – Friday was but a first swallow revealing that the Fed is ready to step in when things start to look bleak for the „generally accepted metric of economic success“, the stock market.

Monday, August 23, 2021

Stock Market Correction Underway – How much? / Stock-Markets / Stock Market 2021

By: Andre_Gratian

Current Position of the Market

SPX Long-term trend:  There is some evidence that we are still in the bull market which started in 2009 and which could continue into 2021 until major cycles take over, and it ends.  A move up to ~4500 is possible before the current bull market makes a final top and SPX corrects into its next major cycle low due in 2023.

SPX Intermediate trend:  SPX correction underway.

Analysis of the short-term trend is done daily with the help of hourly charts. They are important adjuncts to the analysis of daily and weekly charts which determine longer market trends.

Sunday, August 22, 2021

Repo, Debt and Bond Markets in Financial Crisis 2.0, Michael "Big Short" Burry CRASH is Coming's Track Record / Stock-Markets / Financial Crisis 2021

By: Nadeem_Walayat

This is part 2 of my recent extensive analysis (Part 1) in advance of Financial Crisis 2.0 as a handful of stocks are driving the indices higher, Apple worth $2.3 trillion, Microsoft $2 trillion, Amazon $1.8 trillion, Google 1.8 trillion, Facebook $1 trillion even that over priced pile of poop Tesla came close to being valued at $1 trillion, we are definitely in a bubble, you only need to go onto youtube and watch the to the moon videos of Cathy Wood, literally everything's going to go to the moon because her barely out of puberty Quants decree it to be so. This is clearly a major warning sign of a unsustainable trend when indices are ruled by such a small clique of tech stocks where the greatest similarity is with the dot come bubble in terms of the valuation of stocks that actually produce revenues unlike the largely worthless dot com's of that time.

Sunday, August 22, 2021

Stocks: What to Make of Wall Street's Sky-High Optimism / Stock-Markets / Stock Market 2021

By: EWI

"I believe that the market moves in whatever direction hurts the most participants"

The U.S. stock market has been in an uptrend since March 2009 -- so, more than 12 years.

To add icing to the cake, there's this notable factoid (CNBC, August 16):

S&P 500 doubles from its pandemic bottom, marking the fastest bull market rally since WWII

So, after such a historic run, one might think that many Wall Street analysts would say that it's time to take at least some chips off the table.

Saturday, August 21, 2021

Markets Making the Fed Blink / Stock-Markets / Financial Markets 2021

By: Monica_Kingsley

Sea of red in stocks, reversed shortly after the open – is the worst behind? Remembering my Tuesday‘s words bringing up again downside risk (these have been growing for quite a few days before already), I don‘t think so – I consider yesterday‘s volatility as likely not to have yet peaked, and the VIX close above 21 could be overcome perhaps as early as Tuesday.

It‘s that the shift in sentiment to risk off is everywhere to be seen – surging dollar, declining yields, value doing way worse than tech, gold outperforming silver, gold holding up very well, copper and oil striving to bottom, inflation expectations approaching the lower end of its recent range, and quite a few more signs including from select currency pairs – pretty consistent with the takeaways from yesterday‘s extensive analysis. If you hadn‘t read this taper navigation game plan already, have a look, as the feedback was very positive:

(…) This is the time to be picky about where to be exposed to risks, which asset classes are likely to ride the taper and growth storms best. I think it would be copper over oil, and gold over silver. The stock market correction appears in its opening stages indeed, and cryptos still chopping around would be a great result. It‘ll take a while for the dollar to roll over to the downside, but look for it to do so over the medium to longer term, and keep an eye on Treasuries – would be great if they confirmed my midpoint economic cycle hypothesis and didn‘t spike. Finally, I expect the Fed to come to its senses as not enough of what‘s left of the free market, would step up to the plate and finance growing „building back better“ deficits. So far, so good.

Friday, August 20, 2021

S&P 500 Back Below 4,400. Dip to Buy or a New Downtrend? / Stock-Markets / Stock Market 2021

By: Paul_Rejczak

Stocks sold off yesterday as the fear of Fed tapering grew. Monday’s run-up was definitely a bull trap, and our short position is profitable now.

The S&P 500 index lost 1.1% on Wednesday and the futures contract continued selling off overnight. The index will most likely break below its late July consolidation and the support level of 4,370 this morning. However, it may get near a short-term bottom, as it gets closer to the 4,350 level. It’s the nearest important support level, marked by the three-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Thursday, August 19, 2021

Fed Between a Rock and a Hard Place / Stock-Markets / Financial Markets 2021

By: Monica_Kingsley

No, it‘s not about stocks, however well they hang on to recent gains. ATHs hit again amid recovering corporate credit markets, with both tech and value contributing. Value though was looking more vulnerable going into yesterday‘s session, and just one look at financials or energy confirms that – in the world of question marks over high pace of economic growth, it‘s the Fed that‘s between a rock and hard place.

On one hand, they have stubborn and quickening inflation to deal with (or pretend to deal with through the FOMC, the federal open mouth committee) – getting ahead of the curve means serious tightening (okay, first getting less loose monetarily, which is what taper is about). Given China‘s slowdown and corresponding U.S. figures projected, it would be a tall order to turn off the spigot into a weakening (but still growing) economy – that has potential to trigger quite a correction in stocks and risk-on assets. Note copper and oil paring recent gains, and going largely sideways for weeks – not rolling over, but the light is amber, irrespective of the infrastructure bill.

On the other hand, if the central bank does nothing, inflation would grow even more entrenched, sinking the stock market and economy over time, anyway. Don‘t forget about the massive spending – the Fed turning restrictive isn‘t the math favored outcome here.

Thursday, August 19, 2021

Surprising Consumer Activity May Suggest A Deeper Shift In The Markets / Stock-Markets / Financial Markets 2021

By: Chris_Vermeulen

Recent economic data suggests that US consumers are starting to pull away from the types of buying/spending activities we saw after the COVID virus event that shifted the US economy away from travel/office and towards work-from-home solutions.  The deep decline in the US and global economic indicators, as a result of the COVID-19 shutdown, prompted an incredible recovery rally phase in the markets that had everyone chasing the uptrend in stocks, housing prices, and other assets.  Now that we are beyond 15+ months after the March 2020 COVID lows, a new dynamic may be setting up in the markets.

Wednesday, August 18, 2021

The Long Shadow Over Reflation Market Trades / Stock-Markets / Financial Markets 2021

By: Monica_Kingsley

Consumer confidence undershoot didn‘t bring down stocks as the retreat in yields (away from the reflation trades) didn‘t spook value stocks, and only lifted tech. It‘s true that XLK isn‘t firing on all cylinders, and the semiconductors‘ lag is just as concerning as Russell 2000 underperformance – so much for explaining the risks in stocks.

But as I wrote on Friday:

(…) Inflationary pressures building up aren‘t spooking the markets, there is no forcing the Fed‘s hand through rising yields. The bond vigilantes seem a distant memory as yields are trading well below their historical band, stunningly low given the hot inflation data. I‘m not saying red hot because the monthly CPI figure came in line with expectations, providing relief to the transitory camp. But last week‘s ISM services PMI and yesterday‘s PPI paint a very different story (to come).

My call about summer lull in bonds before these slowly but surely make their way higher (the 10-year to 1.80%), is turning out just as well as the inflation expectations‘ continued rebound. The cheap magic of Fed‘s June jawboning is losing its luster. Stocks steady and making marginally higher ATHs practically daily, uneven credit markets, gold holding up well following Monday‘s hit job, oil and copper trading in narrow ranges while the crypto uptrend goes on – fresh profits harvested across the markets yesterday, and growing today.

Regarding the taper noises many Fed speakers made during the week (it isn‘t just about Dallas), some form of taper looks indeed coming, even though they would have a hard time pulling it off against decelerating economy and massive fresh spending. Mission impossible if you will. Still, they make the appearance of wanting to try – wouldn‘t tanking markets and fresh calls to do something be a perfect excuse to expanding balance sheet solidly again? But they must at least internally in the Eccles building understand that a move against inflation is long overdue, and perhaps a repetition of June FOMC wouldn‘t do the trick this time.

Wednesday, August 18, 2021

Stock Market Is About To Crash - Part XXIII (This Time We Mean It) / Stock-Markets / Stock Market 2021

By: Avi_Gilburt

As the market began its historic rally off the March 2020 low, many were convinced that we had begun a bear market. In fact, I witnessed many people posting about short trades in which one cannot lose during that rally. The common perspective was that due to the highest Covid death rates being reported during the spring of 2020, economic shutdowns being seen all over the country, and record unemployment being reported, there was no way the market could continue to rally. It was simply impossible in most people’s minds.

Yet, continue to rally we did. Imagine if there was someone who warned you that we were going to 4000+ from the 2200SPX region, and who actually turned strongly bullish as we were hitting the lows. You would think that more and more people would be interested in what caused this person to maintain such a strong bullish bias in the face of utter despair.

It is uncanny. Avi and his team are working their ass off - and they make incredible calls. The constantly tell you to unlearn everything you learned before, and most people struggle with this. I still do. But the more I embrace their trading style the greener my account gets. I mean, when a guy tells you that we will see SPX 3200+ in a few weeks/months in the middle of a crisis like corona, it is very hard to let go of your shorts. I wish I did,.. Well, today, when Avi tells me what he thinks is most probably going to happen and how,... I listen. And it is a pleasure to watch my balance grow.

Tuesday, August 17, 2021

August Stock Market Flash Crashes Historical Analysis / Stock-Markets / Stock Market Crash

By: Chris_Vermeulen

Weakening volume after an extended rally phase is fairly common.  It represents a complacency in the markets where traders/investors are unwilling to chase an extended rally phase at higher prices.  Often traders are waiting for some type of market correction or rotation to happen – which will allow them to deploy capital back into the markets at decreased price levels.  Sometimes, this diminishing volume presents a unique scenario where traders shift their expectations away from traditional “buy the dip” thinking and that can sometimes create what is called a Flash Crash event.

Revisiting the August 2015 Flash Crash Event

In August 2015, a unique Flash Crash took place that prompted a -12.5% collapse in the S&P 500 in just four trading days – after a bout of selling pressure on a Wednesday/Thursday/Friday.  The following Monday, the markets opened with a small lower opening gap, yet traders were unwilling to buy into the ASK and this created a very unique scenario where price exploration created a widening price void.  As algos and computers continued to try to find active buyers in the marketplace, the ASK/BID spreads continued to widen as the liquidity trap had sprung.

Tuesday, August 17, 2021

Fresh Stock Market Highs to Meet Fresh Volatility / Stock-Markets / Stock Market 2021

By: Monica_Kingsley

Inflationary pressures building up aren‘t spooking the markets, there is no forcing the Fed‘s hand through rising yields. The bond vigilantes seem a distant memory as yields are trading well below their historical band, stunningly low given the hot inflation data. I‘m not saying red hot because the monthly CPI figure came in line with expectations, providing relief to the transitory camp. But last week‘s ISM services PMI and yesterday‘s PPI paint a very different story (to come).

My call about summer lull in bonds before these slowly but surely make their way higher (the 10-year to 1.80%), is turning out just as well as the inflation expectations‘ continued rebound. The cheap magic of Fed‘s June jawboning is losing its luster. Stocks steady and making marginally higher ATHs practically daily, uneven credit markets, gold holding up well following Monday‘s hit job, oil and copper trading in narrow ranges while the crypto uptrend goes on – fresh profits harvested across the markets yesterday, and new ones growing today.

The countdown to the Jackson Hole is on though, with the Fed practically having to do something – something in all likelihood face saving only as the record deficit spending gives it little to no maneuvering room.

Monday, August 16, 2021

Stock Market Strong Intermediate Reversal Warning / Stock-Markets / Stock Market 2021

By: Andre_Gratian

Current Position of the Market

SPX Long-term trend:  There is some evidence that we are still in the bull market which started in 2009 and which could continue into 2021 until major cycles take over, and it ends.  A move up to ~4500 is possible before the current bull market makes a final top and SPX corrects into its next major cycle low due in 2023.

SPX Intermediate trend:  SPX should now have reached its next intermediate top.

Analysis of the short-term trend is done daily with the help of hourly charts. They are important adjuncts to the analysis of daily and weekly charts which determine longer market trends.

Monday, August 16, 2021

How Options Are Fueling The Markets / Stock-Markets / Options & Warrants

By: Chris_Vermeulen

In the past week, we have seen the Nasdaq and the S&P reach all-time highs.  Since the covid crash, we have seen some massive movement to the upside.  I believe there are several factors driving these markets up.

First, let’s look at the covid crisis and how it played a role. As a result of the shutdowns, the FED took a really aggressive stance with its quantitative easing measures.  Lots of money printing to pay for massive stimulus payouts.  The worse news we hear historically is that the markets will react sharply to the downside.