The 2012 Analog Continues

While the 2012 Deja-Vu chart analog continues to play out in far too similarly scary manner than many had believed possible, a glance at the catalysts over the two months that form the 'tops' should also send a shiver down the spine of the momentum believers. In 2012, the first dip was the Greek default and restructuring (a Europe-based crisis risk flare); that dip was bought (of course) as "the worst is behind us," only to see a miss in US non-farm payrolls confirm the "it's different this time," hopers were wrong once again. In 2013, the Italian election created a Europe crisis risk-flare, which was bought (of course) as "the ECB has our back", and then a month later, the non-farm payroll prints at a dismal level. For now, we remain hopefully bid on a sea of central bank liquidity (just as we were in 2012 thanks to ECB's LTROs) but what happens when 'markets' realize the hole is bigger than the central banks can fill?

 

 

The key thing is - it is different this time - margin is at record highs, net longs are at record highs, and even retail has unwound some money market and thrown it at stocks; so this time, maybe the central banks won;t have the ammo to stall the selloff like they did last year and in 2011...

 

Charts: Bloomberg