"A Market Likely To Suck Everyone In To Its Last Updraft "

Tyler Durden's picture

From Sean Corrigan Of Diapason Commodities Management

Material Evidence

At present the whole world is happy to treat the post?Shutdown US as a Goldilocks fable. Herein, such good macro numbers as do occur are eitherdeemed an aberration soon to reversed as the supposed disruption of the budget dispute filters its way into the reckoning, or else they serve to underpin the assumptions of higher earnings to come. Weaker ones – like the just?released NFP – are also welcome for their prophylactic effect since they can only continue to disarm an already bedraggled flock of Fed hawks, leaving the rest of us hoarsely Yellen for more.

So, in the run?up to book closing, we may see everyone scramble out to their waiting Sopwith, silk scarf flapping jauntily in the slipstream of the ‘crate’s’ spinning propellers, to the exultant cryof, “Chocks away, Ginger!? Off will go our heroes, soaring not so much to a tumult in the clouds as to the wide, blue yonder of ever higher equity prices and ever fatter bonus cheques.

Ye Gods! Even that discredited old hack, Alan Greenspan ? the man who bears as much responsibility as anyone for the hypertrophy of state- supported finance and thus for the havoc it continues to wreak ? is at it, trying to tell us that because of a low ‘equity premium’ (read: ludicrously intervention?depressed bond yields), the ‘momentum’ of stocks ‘is still relatively up’.

Such a market is therefore likely to suck everyone in to its last, Plinian updraft no matter how stretched everything becomes and no matter how great the risk of being cast into perdition in the pyroclastic collapse to come. That said, one cannot fail to be tempted by the fact that margin debt is in the stratosphere (a new dollar high and a fraction of market cap only outdone in QI’00); sentiment is heavily bullish (the AAII Bull?Bear index is at levels only once beaten to any significant degree in the past since the start of 2006; while that same index multiplied by stock prices is in the 97th percentile of a quarter?century sample), put?call skews are high and vols are low.

In turn, this means that our favourite ‘Blue Sky’ indices (index levels divided by volatility measures, such as OEX/VXO) are off the charts. Indeed, that particular example is now 2.7 sigmas over a 28?year mean, in a 99th percentile which has only once been surpassed, at the start of 2007, before the first rumblings of the CDO cyclone and sub?prime tsunami were audible to any but the most perceptive listener. In Germany, the DAX/VDAX equivalent sits at a major, new 21?year high, a whopping 3.7 sigmas over its period mean.

There are one or two other technical signals, too. The S&P500 ex?financials has all but completed a handsome?looking long?term profile during the DDIE. The financials, meanwhile, have retraced 50% of their LEH?AIG meltdown. Nasdaq has been on one of Didier Sornette’s exponential accelerations, climbing more ever more rapidly on ever shorter timeframes up into the top few percent of another clean, projected top mapped out off the 2009 lows. Looking further back in time, since that same 2009 nadir, the DJIA has ascended by an amount only exceeded in the run up to 1920, 1929, 1937, 1987, and 2000 – all of them major tops. Juicy!

What we must caution here, however, is that anyone tempted to lean into this particular wind must have the patience to wait for signs of even a temporary exhaustion before setting shorts. Critical, too, will be the discipline to stop out if and when those initial selling ‘tails’ start to fill back in, for fear that this is a signal that the mania has not yet ended and that the buyers of dips are still all too dominant.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Trimmed Hedge's picture

Well, I haven't been sucked in a while.. so, you know...

Millivanilli's picture

A deflationary collapse will cause social upheavel much faster than an inflationary explosion.   At this point in the exponential function, credit will have get up to 104 trillion dollars, consumer and govt. combined by 2015- currently at 60 trillion.   Place your bets...  

King_of_simpletons's picture

Central banks have lost credibility. They have been exposed as tools and fools. It's the end game, no matter how, it just does not matter.

LooseLee's picture

...."Central banks have lost credibility."  Ha, ha. Only to those with a modicum of intelligence. Bulltards need not apply..

flacon's picture

When they announce QE increase soon, does that mean stocks up gold down again?

fonzannoon's picture

yes, or maybe gold just stays put around here while stocks leg up again. How exactly has the fed lost credibility?


Here is a quick anecdote. I went into Manhattan last night. It should take me an hour to get in there and park. It took me 3.5hrs. As I sat there in traffic I looked around me and it was all Lexus's Benz and Beamers. Old and young people. The most carefree people I have ever seen. Just playing music and laughing in their cars. I went to 3-4 bars with a few buddies and their co-workers, all of them jam packed. They work at one of the largest accounting firms on the planet. My 2 buddies just made partner. These guys are smart dudes. They started talking about the market a bit. These guys barely know who the fed is or what the fed does. They have absolutely no clue what QE is or how it works. They just know the market is awesome. So if joe six pack has no clue who the fed is or what it does, and neither do these guys. Who has the fed lost credibility with?

Also, fwiw I was at a block party on Long Island yesterday. My buddies sister is a real estate attorney. People started asking her questions about the real estate market. She went on this long rant about how absolutely awful it is. She went on to describe foreclosure stuffing ZH style without knowing the term. She seemed blown away by how this could be allowed to go on. The muted response from the crowd..."well as long as it keeps going up".

ParkAveFlasher's picture

Hey guys, Simon Black here.  I can't believe anyone would bother sitting on the LIE for three hours with all the new Llama jet packs on the market right now.  Who needs EZ Pass?  

flacon's picture

I got a face full of anger reading that article. 


"Here kiddies, Zyklon B is good for you in small doeses. Come take a communal shower with Zykon B, all expenses paid courtesy of the Federal Reserve." ~ New York Times



smlbizman's picture

i had to stop reading.....i suddenly realized how much wealthier i am, now that i have to pay 600.00 more a month for health care....cant wait for triple food prices and gas at 10. a gal.....i wil be rolling in it..... 

Pharming's picture

That is an excellent summation of what is wrong in this country.  There are a few of us wackos that talk in a different language than most of our friends.  In my department of approximately 150 pharmacists and technicians, there are less than 10 that keep up on "the way the world turns" via Zerohedge, Drudgereport, etc...  When we do get into our "doom and gloom" discussions, the comments, if there are any...mostly blank stares from the muttenheads are simply..."What?"  "What is QE?"  "You Republicans are all alike..." (which I'm not affiliated with any party).  Then of course I get denial.  "The dollar can't collapse."  "You are crazy for buying silver and gold."  and "Why are you looking at ammo online at www.gunbot.net ?"  

My response simply...  "I follow the 6 G's philosophy."  Ground, Gold, Guns, Grub, Gas and above all, God.  

At that point I get a roll of the eyes and a smirk.  But...25% of the time, they return... with questions.  Or to find out they are taking a self defense class, or got their CC permit, or are listening to Savage, Levin, Beck, Jones or someone similar.

Fow what it's worth... 

Disenchanted's picture

We were above
You standing underneath us
We were not yet lovers
Dragons were smoked
Bumblebees were stinging us
I was soon to be crazy
Eat, drink and be merry
For tomorrow we die
'Cause we're tripping billies


~DMB - Tripping Billies

Peconic Bay's picture

It is frightening that newly minted partners in an accounting firm don't understand the Fed and QE.  We are doomed.

RaceToTheBottom's picture

That is striking, especially since the debasement of accounting rules is one of the major reasons why realestate overhand has not cleared and the marketplace is fake....

WOAR's picture

They're being set up as the fall guys, like the Squidbillies.


depression's picture

Get on the POMO train my friend.

Yellen will 2x POMO to something like $150-175 Billion per month. Just imagine the daily rampfest of insanity  $8-10 Billion hitting the market every morning will trigger.

fonzannoon's picture

Yep, and gas prices are down 50 cents by me the last 3-4 months. Unreal.

Truthseeker2's picture


"Global Financial Architecture and Economic Systems on Verge of Collapse"




TBT or not TBT's picture

Yeah, lower prices would be horrible for people on fixed incomes, making their dollar go further. Oh, wait, it's just the opposite. Young people could buy a house to have kids in, birthrates would bounce back. Can't have any of that.

RaceToTheBottom's picture

The thinking is if you cannot get a loan, you do not exist.

mendolover's picture

Self-starting video ads now?  How many readers are you trying to lose?  Really?

CunnyFunt's picture

Download and install ghostery and all that crap goes away.

19 or so trackers, ads, analytics and widgets on this site alone are terminated.


Ol Man's picture

Also    AdBlocker....

Gief Gold Plox's picture

Use firefox and install Ghostery, AdBlockerPlus, Flash Block and NoScript.

Than you'll only get annoyed at ads when you're on someone else's computer... or a mobile browser.

Deacon Frost's picture

'Ghostery' is excellent CunnyFunt 

CunnyFunt's picture

It is definately an excellent tool.

I turned it off to see what ZH is like without it and discovered this site now has pop-up ads! WTF?!?

Ignatius's picture

My computer really slows down on ZH due to all the ads these days.

I hope Tyler will rethink the adverse affects of this.

meterman's picture

Well, good for you Tyler #78 (or whichever one you are), you have imprssed me with your use of more words that nobody has ever seen before - and - all in one artcle. WOW!! Aew you smart. 

Headbanger's picture

It says right there at the top the author is Sean Corrigan you moron!

RSloane's picture

Shhh, obviously its unfair to actually expect him to read let alone comprehend.

dogmete's picture

You guys get hostile pretty damned easy. Fact is most the articles on this blog are rather poorly and bombastically written.

monad's picture

Perfection takes time and the meter is running. Just in time wins a lot of races. You can't win if you don't place, and you can't place if you miss the gate. Compared to the templated, scripted, only vomited once msm content (BYO Everclear chaser/mouthwash), this is a breath of fresh air.

A82EBA's picture

For the market to fall, like in 200 and 2008, does it really have to be a Lehman-type event or can it be a few large funds acting in concert to exit when no one is looking? Is it like you dont want to be the last bird on the wire when the flock flies but you dont want to lead off by yourself cause if the rest dont follow then you dont have a chance to rebuy the dip?

Rainman's picture

TBTF runs the "risk" asset party and the party won't be over until these market makers say so. < where else can they park 85B fiatscos per month ? Lending it ?? hahaha >

RSDallas's picture

Next time lay off the sauce before you start to write!

Obese-Redneck's picture

The scary part is imagining (ex) chief Kessler and (ex) officer Pike explaining to their kids why there will be no presents at Christmas this year because John Kerry was coming to "take my guns" LOL.  Even scarier is the train leaving Ted Nugents ranch with the Kock brothers on the caboose ala Ned Beatty.  

TBT or not TBT's picture

Bored with your usual communist websites?

Heroic Couplet's picture

I made about 120% on my last stock buy, but I'm out of the market for now.

falak pema's picture

the Ultimate whirlpool; Charybdis.

mtthw2's picture

Whirlpool was up 12% in one day last week.

djsmps's picture

I just look at headlines:

2014 ‘Year of the Boom!’ Bet on the bulls now.

Commentary: 5 engines driving a new Roaring Twenties stock market

In Fed and out, many now think inflation helps

falak pema's picture

get your bets to penis enhance by 120%... like a lot of others. Its boom times ahead until it isn't.

The bitch is we never know when the QE gun runs out of effective bullets.

If you get caught on a turn and if you're leveraged like a blown up bladder....you'll hear that air wheezing out and feel like Greenspan's cheeks going hollow.

Hell what's new under the sun. 

Fuh Querada's picture

"In Germany, the DAX/VDAX equivalent sits at a major, new 21?year high, a whopping 3.7 sigmas over its period mean."

Right on. The DAX is highly correlated with the S&P 500 and DJIA suggesting that the central banks are piling in (Japan, Fed) in addition to the hedgies, there is no other explanation. There is at least as much algobot activity as in the S&P. No-one talks about September 2011 any more, when the DAX dropped 35% in 6 weeks and funds got their balls torn off, good luck if you found a bid. Instead, all the analysts are creaming their jeans about DAX taking 9000 and heading for 10000. No-one gives a toss about the increases from 7000 being pure P/E multiple expansion.


Iam Yue2's picture

And of course, the germans don't want inflation (which erodes wealth and debt - letting the borrowers off lightly) and they don't really care about growth. They want to keep their wealth and their power; they do not care about the poor, or the Greeks et al.

The problem for the Germans, of course, is that the euro has appreciated 30-40% against the Yen in a year: Japs don't want German goods. Germans are buying cheap japanese goods instead of home-made ones and third-party countries are switching from German goods to Japanese ones etc.

GrinandBearit's picture

Infinite QE will push the market up higher than anyone here expects.  Just do what I do... sit back in your recliner munching on some popcorn and laugh at it.

The final collapse will come from outside the US, not from within it.  It will happen fairly quickly once initiated.

Inthemix96's picture

Time for little prayer on a Sunday my ZH brothers.

At mid-night tonight, a class one category storm with winds that may reach 90 mph will hit SW England and move east.  I am hoping and praying along with a little help from the God's, it hits central London, especially the square mile and follows on through to the parliament, before sitting over buckingham palace for a few days.

Lets hope storm 'Jude' can wipe a few arseholes out on her righteous journey.

Pray with me bitchez.....         ;-)

TheFourthStooge-ing's picture

One can only hope that if the storm hits the aforementioned targets, the cloud of debris whipped up by the winds becomes something like a whirling maelstrom of potato peelers.

Inthemix96's picture

And that my good man, is that.

Lets hope them old 'Tattie Peelers' be as blunt as fuck, and may God himself propel them to devious action upon the swines of aformentioned debouchery.  Be swift, be true, deliver thine justice said 'Tattie peelers of Wrath'.