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Another Stock Market Rally Fails. Hint: Expect More of This

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43 comments on Another Stock Market Rally Fails. Hint: Expect More of This

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Nasdaq chart courtesy of StockCharts.com, annotations by Mish

That Wednesday buy the dip blast higher lasted all but one day. The Nasdaq keeps testing the 1300+- level but don’t expect it to hold. 

The Long View

Bear Market Volatility

Silver Medal Hoot of the Day Winner

Gold Medal Hoot of the Day Winner

Sorry, I forget to bookmark the Tweet. But someone commented along these lines: “Stay long. The bears are just trying to scare you out of your shares.”

It’s been a long time since I heard that explanation.

Bernanke Moment

Hooray More Leveraged ETFs!

“Single-Stock ETFs on Amazon, Meta, Tesla and More Are Coming. Here’s What We Know“

This reminds me of one of the things we all waited for in 2000: Leap options on JDSU.

JDSU chart courtesy of StockCharts.Com and an unknown person who captured the chart.

ARKK Weekly Chart 

ARKK chart courtesy of Stockcharts.Com, annotations by Mish

That is what a real bear market looks like. The S&P has not even started yet. 

There was no financial justification for that blowoff top, but there is a reason: 

“The Fed goosed assets while Biden goosed spending. That’s the lethal combination explaining what happened.”

Why Inflation?

https://twitter.com/carney/status/1502385973430308866

Thanks John!

Biden’s Lie of the Day

John Carney is referring to my post Biden’s Lie of the Day: “Make No Mistake, Inflation is Largely the Fault of Putin”

We still have the CPI inflation even as the asset bubbles are crashing. 

Bubbles Will Pop

If you think the Fed can fix decades of easy money and reckless Congressional spending while not remotely understanding inflation, you are only nuts. 

Please note Most People Have No Idea How Much Stocks are Likely to Crash

As a result of these bubbles popping, expect a big deflationary crash. Then things will depend on how reckless the Fed and Congress get.

This post originated on MishTalk.Com.

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43 Comments
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Oldest Most Voted
ArchaMoto
ArchaMoto
4 years ago

It’s seems like the job of the Fed now is to systematically mop up the excess money supply, getting it more in line with economic output, as the Government continues to spend? 

To quote Milton Friedman “Inflation is taxation without legislation”. 

It doesn’t seem like it will be a cake walk getting inflated asset valuations back more towards their historic mean averages. It will mostly likely be a couple year event. I’m not sure betting on a rapid crash is how to play this market?  I hate to say things are different this time. 

Considering the current derivatives market is valued at nearly a Quadrillion dollars and the Fed’s ability to play both sides against the middle where ever it suits. Seems like treading cautiously on whatever side you are on is the name of the game. I think we will be hearing about more and more leveraged funds blowing up. 

Economies don’t always get what they want, but eventually build towards what they need. 

Considering the current economic imbalances as we recover from the global pandemic and the unprecedented stimulus the last 2 years. With a 2 year lag between printing and inflation. I’m not sure there would be a better time to slow things toward a recession?

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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  ArchaMoto
This time is the same.
Economies don’t always get what they want, but eventually they get what they deserve.
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Captain Ahab
Captain Ahab
4 years ago
A few more days of 3-4% losses in stock indices, and I suspect the tide will turn. There are zero guarantees,  but the market psychology is changing quickly. If I am right, the  drop will be ‘precipitous’. Too many moms and pops in the market, too many ‘kids’ who have never seen the bottom fall out, too difficult to hedge when the system collapses, too many internal trades, too much use of algorithms…. too much reliance on the Fed to intervene.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Captain Ahab
… too much “spare” money.
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AWC
AWC
4 years ago

Can’t imagine TPTB ever allowing their precious flagship equity “markets” to suffer, nominally. Instead, they will maintain the level of the indices, and devalue the dollar,,,,at least until they can launch their CBDC, which will give them full control of the entire “economy.” 

Going forward, I would expect to see the Dow chart somewhat resemble the chart of the Venezuela IBVC since 2019 or so. 
Triple in price, but losing two thirds in value. 
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William Janes
William Janes
4 years ago
Yawn!  Another day of negative comments from miscellaneous commentators who are all prophets of the present reality.   Keep a level disposition, things are rarely as bad as pundits predict, or as rosy as they may forecast.
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Captain Ahab
Captain Ahab
4 years ago
Reply to  William Janes
Yawn! You have no idea.
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Six000mileyear
Six000mileyear
4 years ago
And if anyone thinks they will make lots of money shorting stocks or buying puts, I would like to remind everyone that during the housing market crash, bank stocks were prevented from being shorted for several weeks. The rules suddenly changed. And the rules can change this time too. Sudden rule changes make forming a strategy nearly impossible. The default position is to liquidate and wait for markets to get as low as the COVID crash. Even then, stocks were overpriced by historic measures, So I’m going to be patient.
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Captain Ahab
Captain Ahab
4 years ago
Reply to  Six000mileyear
Every day, on a certain unnamed blog, certain financial gurus evaluated US banks exposure to risk. Fortunes were made before the rules were changed. The accuracy–with publicly available data–was mindboggling.
I did not participate in the shorting; however, analysis in other areas was also profitable. I retired a year later.
This time around, I concur with Mish on ‘buy gold,’ but with one proviso: 50% needs to be in accounts outside the USA.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Six000mileyear
Ask the Hunt brothers about the “rules.”
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Tony Bennett
Tony Bennett
4 years ago
“That is what a real bear market looks like. The S&P has not even started yet.”
…
Yes.  The masses still expect quick bounce back when war over.  
The worm  beginning to wake … when it turns – and it will – the masses will be (finally) be concerned with Return OF Capital, rather than Return ON Capital (of past 13 years).
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Six000mileyear
Six000mileyear
4 years ago
Reply to  Tony Bennett
Especially in bonds. Return OF investment will be the driving force behind higher interest rates.
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Tony Bennett
Tony Bennett
4 years ago
Reply to  Six000mileyear
Treasuries will be GOLDEN.
EVERY other type of bond.  Good Luck.
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Cocoa
Cocoa
4 years ago
The FED doesn’t have control over speculation , but it certainly causes it. And debt deflation when the party is over
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thimk
thimk
4 years ago
Interesting chart – total Nasdaq market cap historical , can’t find S&p , dow  . we ve retraced back to june  2021
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Christoball
Christoball
4 years ago
Reply to  thimk
I read on wikipedia that Nasdaq  Inc. also owns the Philadelphia stock exchange and the Boston stock exchange as well as seven European stock exchanges. They hold a %29 share of the London Stock Exchange Group.
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thimk
thimk
4 years ago
Reply to  thimk
correction that chart is NOT total market cap – just one stock NDAQ – my bad 
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Christoball
Christoball
4 years ago
Reply to  thimk
Their chart looks similar to the Total Market Cap, just smaller numbers
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Doug78
Doug78
4 years ago
There is no way to trade these markets unless it’s your job and you have too. A lot of assumptions are out the window now. Some things that were used to be considered impossible are now possible and some things considered possible are now impossible. The worst part is that we are at the beginning and maybe years away from a resolution. The surest play are the commodities but since they seem so sure I am wondering if most of the movement has already occurred. Another assumption fell yesterday. The EU decided to “mutualize” their natural gas supplies. They will buy in bulk and allocate the gas to the different countries. It’s a logical step but it means that prices are no longer fixed by the market except in the upstream area. The same thing could happen in any commodity; upstream market prices and downstream price controls. That is just one example. 
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StukiMoi
StukiMoi
4 years ago
Reply to  Doug78
“There is no way to trade these markets….”
You “trade” them the same as always. From the POV of individual actors making individual decisions; aside from perhaps for a very, very few celebrities who may have the direct ear of the Fed and Government; they have never been any different from any other game of random numbers. Nothing has changed i that regard.
What may change, or have changed, is the rake the house is able to collect. And, perhaps, how close to The Fed and Government one has to be, to be allowed to share in the rake, vs having to pay it. As the outer layers of the pyramids become robbed to destitution, the only way to continue funneling loot to those closest to The Fed, is to keep moving that boundary closer. Such that yet another class of people who used to be relative beneficiaries of the theft, become shifted to the patsies side of the ledger.
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Mish
Mish
4 years ago
@Realist, let’s self-assess about what happened.
You blatantly misquoted me using quote marks, something I never said. That misquote followed a prolonged period of incessant nitpicking over various things.
You, more than anyone else, being a long-term reader, ought to know my biggest pet peeve is being misquoted. And on top of that, it seems pretty obvious you did it on purpose. 
Several people have emailed me privately that they view you as a troll. I let it slide, but I do not tolerate people sticking words in my mouth, with or without quote marks, things I never said. 
I will repeat this comment in every post until you at least acknowledge reading it, preferable with an apology. 
Mish
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Captain Ahab
Captain Ahab
4 years ago
Reply to  Mish
My experience has been that Realist self-aggrandizes, shutting out people who do not bow down to his opinion.  He’s entitled to his opinion; however, anyone taking his advice needs to do their own due diligence. For example, study the relationship of oil and recessions, post 1970s. I suspect the upside window is very short with a recession bearing down–that is the risk is extreme if global demand collapses, as past history suggests.
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Casual_Observer2020
Casual_Observer2020
4 years ago
Didn’t know the President alone was responsible for spending. Can we stop blaming individuals and just say the system got us here ? 
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Jmurr
Jmurr
4 years ago
Reply to  Casual_Observer2020
The buck stops somewhere else?
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Zardoz
Zardoz
4 years ago
Reply to  Jmurr
“I don’t take responsibility for  anything”
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Cocoa
Cocoa
4 years ago
Reply to  Casual_Observer2020
Since Biden decided to blame the market rollover and oil prices in Putin, we can blame Biden. In fact the whole economy went to crap as the Dems won Congress and ginned up Covid hysteria to the point where everything shut down in blue states.
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Robbyrob
Robbyrob
4 years ago
and this war is just getting started Belarus may be preparing to invade Ukraine At
least 1,582 civilians in Mariupol have been killed • Russian forces
plan to fire on Belarus from Ukraine in order to draw them into war.
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Jojo
Jojo
4 years ago
Reply to  Robbyrob
Russia is already firing and moving into Ukraine from Belarus.  They don’t need any false flag for something they are already doing.  Belarus is under the same sanctions as Russia.  
———
Why Belarus is so involved in Russia’s invasion of Ukraine
March 11, 2022
As the U.S. and its European allies move to cinch Russia off from global trade and international funds over its ongoing invasion of Ukraine, one country has landed alongside it in the Western crosshairs: Belarus.
The landlocked country of 9 million people borders northern Ukraine and served as a staging ground for Russian troops in the months preceding the invasion. It has also hosted diplomatic talks between Russia and Ukraine.
On Wednesday, the European Union announced it would ban Belarusian banks from the SWIFT global financial messaging system and freeze ties with Belarus’ central bank, adding to sanctions levied last week that effectively block billions of euros’ worth of annual exports to the EU.
And the White House announced its own sanctions last week to limit imports and target Belarusian military officials, as it criticized Belarus for “enabling Putin’s invasion of Ukraine.”
….
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Zardoz
Zardoz
4 years ago
Reply to  Jojo
Viewing Russia as a source of truth is … amusing.
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prumbly
prumbly
4 years ago
Reply to  Robbyrob
Oh dear, oh dear! Lukashenko will do what Moscow asks of him – his survival depends on it. No need to fire missiles at his country!
It’s sad when (presumably) intelligent people are unable to see through even the most obvious propaganda.
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Six000mileyear
Six000mileyear
4 years ago
Reply to  Robbyrob
Belarus is already drawn into war by the fact it allowed Russia to stage an invasion into northern Ukraine. The West wants to use diplomacy first with Belarus.
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Eddie_T
Eddie_T
4 years ago
I sold enough  stock to be completely deleveraged. I consolidated further. Now I am just Canadian O&G and physical uranium and uranium equities only . Depending on how next week plays out, I am considering going to 100% physical uranium to ride out a crash, if we look to be headed there. I sort of like that idea.
 I can afford to close my computer and not check my trading account until next year….not worried at all. But I do think there are ways to stay in and  not get killed. 
Nest week Powell has to be either hawkish or dovish. I lean toward still believing they raise 25 to 50 bps and no more.
I don’t believe they will ever actually reduce the balance sheet….not for long anyway. Not with this yield curve and the almost certain recession that lies ahead.
The thing I think that would be interesting, is if they raise and markets melt up. Nobody expects that. Nobody. Therefore….
I think it is quite possible Powell decides to play the Ukraine card and suddenly goes all dovish….and I think if that happens the markets might  crash anyway. Just shoot him the finger and roll over and  drop 20-30 or 40% over the next few months.
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Eddie_T
Eddie_T
4 years ago
Reply to  Eddie_T
The finish today saw stocks really sell off on big volume. Butt ugly.
Not a good sign, ever, for a Friday before a Fed announcement.
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Carl_R
Carl_R
4 years ago
Reply to  Eddie_T
The Fed has a problem. Congress keeps spending, which keeps the pedal to the metal, but it also creates inflation. Despite the spending, the economy has cracks in it. If the Fed hikes, the cracks will get bigger and a recession will be here. If they Fed doesn’t hike, inflation gets bigger.  I don’t envy their position..
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prumbly
prumbly
4 years ago
Reply to  Carl_R
Doesn’t really matter what the Fed does – the economy is going to tank anyway. $120 gas has that effect.
Bets option would be to make nice with Mr Putin and negotiate a peace. Stop the absurd self-righteous, arrogant, hypocritical anti-Russia posturing. Save lives. Save economies. Where did all the statesmen go?
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ohno
ohno
4 years ago
Reply to  prumbly
Kinda scary. Even if you’re off ok what kind of environment is it going to be with everyone else getting crushed? Not good.
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Jojo
Jojo
4 years ago
Reply to  prumbly
Best option would be for the USA+NATO to kick Putin’s arse, capture him, bury him in the sand and let the ants eat him alive.  Then we divide up Russia and Belarus.  Maybe give Belarus to Ukraine.
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Jack
Jack
4 years ago
Reply to  Eddie_T

Are you buying uranium futures?

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Eddie_T
Eddie_T
4 years ago
Reply to  Jack
No. No options or futures. I’m not a real speculator.
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Christoball
Christoball
4 years ago
Reply to  Eddie_T
“I sold enough  stock to be completely deleveraged. I consolidated
further. Now I am just Canadian O&G and physical uranium and uranium
equities only . Depending on how next week plays out, I am considering
going to 100% physical uranium to ride out a crash, if we look to be
headed there. I sort of like that idea.”
As a friend I hate to see anyone go %100 in on anything.  Uranium can crash just like oil. My crystal ball is saying , I see lots of precious metals in Eddies life.  Gold, Silver, Antimony, Mercury, Tin, Zinc, Copper, and maybe some UV activated resin.
Join us Eddie, it is not too late. Like heaven you do not want to go kicking and screaming to what we believe.
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Eddie_T
Eddie_T
4 years ago
Reply to  Christoball
I like to buy twofer uranium names . I have UUUU with their rare earth play. I have GLO with zinc. I have SYH with gold and base metals. AEC with vanadium.  EL8 has gold.
I have a list of  the pm and diversified miners I want to own. I am out of most of them at the moment because my u names and O&G names are making much bigger gains than they are. That might change any day, and I will pivot when appropriate.  In the fullness of time, I want to own all kinds of energy , and metals and metal miners. Just trying to leverage my little experimental portfolio while oil and uranium are trending, which they are, big time.
But I truly do believe……the only thing that can hurt uranium longer term would be one or more serious nuclear accidents. A decade of bad energy policies all over the western world…the wholesale rejection of nuclear power after Fukushima…..now compounded by the US  losing access to Russian (and possibly Kazak) uranium, guarantees that uranium is today, the most undervalued substance known to man. All over the world right now (in more pragmatic countries) new reactors are being built and coming online, and that is a trend that will go on until after we are all dead. Book it.
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Eddie_T
Eddie_T
4 years ago
Reply to  Christoball
The other thing….something most people haven’’t considered is that there is essentially NO demand destruction in uranium price going forward (barring meltdowns and the resulting bad PR that would ensue).
The cost of fuel for nuclear reactors is maybe 1% of operating costs, making spot price for uranium almost irrelevant for the utilities. Much different from oil . It’s funny that 95% of oil goes to other uses than transportation, but it is the price of gasoline and diesel a the pump that is the primary cap on oil price.
I do hope and believe that eV’s will help change that and that someday oil price might be less volatile on that account. But probably not anytime soon.
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Christoball
Christoball
4 years ago
Reply to  Eddie_T
I just hate to see people who follow you or Realists advice loose their shirts. You already said you were going to work until you are 71, but I would hate to see you or anyone following your advice to have to work longer because they put all their eggs in one basket.
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