NASDAQ

The last time The Nasdaq was this overbought, the index peaked and dropped 7% in the next week. With 'Greed' near 2015 highs, perhaps the decoupling of VIX from stocks suggests many have similar ideas of hedging these exuberant gains.

So far today's trading session has been a repeat of what happened overnight on Monday, when following a weak start on even more weak Chinese data, US equities soared on the first trading day of the month continuing their blistering surge since that dreadful September payrolls report, which as we showed was mostly catalyzed by a near record bout of short's being squeezed and covering, which accelerated just as the S&P broke the 2100 level.

As Nasdaq 100 surges above July 2015 cycle highs towards 2000 record highs and the S&P 500 breaks the key 2,100 level - erasing all the losses from August 11th's start of China's devaluation, global markets in turmoil collapse - on ever-decreasing volume, it appears the credit market 'changed its mind' after Europe closed. What happens next?

If one looks at the NDX alone, one would have to conclude that the bull market is perfectly intact. The same is true of selected sub-sectors, but more and more sectors or stocks within sectors are waving good-bye to the rally. Even NDX and Nasdaq Composite have begun to diverge of late, underscoring the extreme concentration in big cap names. Naturally, divergences can be “repaired”, and internals can always improve. The reality is however that we have been able to observe weakening internals and negative divergences for a very long time by now, and they sure haven’t improved so far. In terms of probabilities, history suggests that it is more likely that the big caps will eventually succumb as well.

On a day full of Manufacturing/PMI surveys from around the globe, the numbers everyone was looking at came out of China, where first the official, NBS PMI data disappointed after missing Mfg PMI expectations (3rd month in a row of contraction), with the Non-mfg PMI sliding to the lowest since 2008, however this was promptly "corrected" after the other Caixin manufacturing PMI soared to 48.3 in October from 47.2 in September - the biggest monthly rise of 2015 - and far better than the median estimate of 47.6, once again leading to the usual questions about China's Schrodinger economy, first defined here, which is continues to expand and contract at the same time.

Investors are aware that the market is manipulated... and it doesn’t seem to worry them. They don’t fight the Fed; they sit down at the table with it. They play the game. And so far, they have done well. But now... She will signal that, soon, the central bank will begin the long return to “normalcy.” Don’t believe it. The entire system depends on abnormality.

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"During the third quarter, we determined that it was necessary to adjust our smartphone inventory primarily through the write-down of older generation phones, and via the acceleration of secondary market dispositions of excess phone inventory."

Two biggest move overnight came from everyone's favorite carry pair, the USDJPY, which may have finally read what we said yesterday, namely that with the Fed and ECB both doing its job, there is little need for the Bank of Japan to repeat its Halloween massacre for the second year in a row, and as a result will keep its QQE program unchanged. It promptly tumbled from its 121 tractor level, to just above 120.25, where BOJ bids were said to be found. With the FOMC October meeting starting today, the other overnight catalyst was not surprisingly the latest Hilsenrath scribe in which he removed any uncertainty about a Wednesday hike, "leaving mid-December as the central bank’s last chance to raise rates this year."

If this is indeed a rerun of the post-LTCM/pre first tech bubble days, then oil is about to soar by 150%

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