What a roundtrip!
After starting off November with a bang, and after nearly retracing all October losses in the aftermath of the NFP headfake in less than 2 trading sessions, the S&P futures literally imploded, and dropped 23 points from the intraday high, the same distance traveled as, only to the downside and on very strong volume for the second day in a row.
While the 1400 support in ES is once again in play (ES closed literally on the lows of the session at 1405.5), as we suggested earlier, the far more ominous news is that the AAPL bubble appears to have popped (but, but, it is so cheap on forward multiple basis: guess what - forward multiples are based on forward earnings, which may very well never materialize! and thanks to the dividend, not even AAPL's cash hoard is the bastion it one was) and is now close to entering bear market territory, down just shy of 20% from its all time highs of $705.07 hit on September 12. Now with the 200 DMA taken out, the next support is the 20% retracement from the high which is at $564. After that it is freefall for a long time as a very deep gap needs filling. It is unclear just how much of the selling was there to cause max pain for Dick Bove and Rochdale, for whom every tick lower in the stock means a bigger margin call.Finally, news hitting literally seconds ago that MSFT may be launching its own phone if its partner strategy falters, means there go even more margins.
But it was not only AAPL: nothing was spared as gold, the EUR, Crude, and virtually every other asset class collapsed as a result of what started as a broad-based selloff, reinforced by dollar strength, and them accelerated as various hedge funds were hit by margin calls.
And what is likely worst for risk is that various Fed presidents spoke and promised more, more, more QE and.... nothing. The market no longer cares about promises of future QE, which is exactly as we said would happen: the Fed has now shot itself in the foot, or more accurately, priced itself out of the market as there is no further element of surprise left! When it was in its promises phases, it was easy. Now that it has shifted to real action, it has little actual market driving capacity.
As for the final leg of the central bank stool to be kicked out, will be when Spain finally throws in the towel and forces the ECB to also shift from talk to action on endless monetization. At that point it will be time to get out of all paper assets as the exponential monetization phase will be unleashed.
So enjoy the weekend: all the pre-election good news has now come and gone. Monday and Tuesday are limbo days, and then on Wednesday we all wake up to the reality of America's busted political system, and a broken and insolvent Europe. Then things really get fun.