Is anyone surprised? It’s 2016. Everything that will not happen, happens.
The SPX just put in its first triple inside day for the first time since – wait for it – 1970. Everyone thinks stocks are going to the moon. The “Santa Rally” into year end is in full effect and we will not come down until January. Everything is going up! Just buy stocks!
If you look under the surface everything does not seem to be puppy dogs and rainbows. Yes, I was super bullish in all of November, right BEFORE and AFTER the election. However, a week and a half ago, my tone changed. I could feel, for the first time in a long time, the “bullish scent” in the air. Hell even this guy threw the towel in! It felt different, it was a different breakout this time.
It felt like one event, one day, changed everything about this Bull Market over the last 5 years. No one was a believer in this bull market through 2013 and 2014. Everyone thought we were going to breakdown all of 2015-2016 (I am talking a big breakdown 25%+ draw down).
And then..BOOM! Trump got elected and we are going to Make America Great Again (at least stocks great again!) That’s just different to me. For so long everyone was so Bearish and then now there is no turning back. That, may be the feeling of Euphoria that my generation has NEVER seen before.
This Chart shows the complete #TrumpTrade that propelled the SPX to new heights. Now we are sitting at the top end of the range after everyone in America chased this move.
Not only are we at the top end of the range with levels, we are also VERY extended from the 20 Day MA (30 handles) and about 6% above the 200 Day MA (130 handles). With this 3 day compression, I believe that only more volatility lies ahead in the near term.
What on earth could cause this upcoming volatility in the stock market. I believe the answer is none other than Global Macro.
The Yen has been devalued over 18% in 6 weeks. 18% in 6 Weeks! That is a global currency devaluation that has propelled the SPX to these extreme valuations. Bond bulls are now dead, gold bulls are now dead (for now), and SPX bulls are running rampant these days. China is getting killed, emerging markets are getting killed, the Euro is breaking down (maybe), our pet’s heads are falling off!
Tonight the BOJ will release its policy decision. I am fully expecting the dollar to get smoked, the USDJPY fall, and gold and bond to ramp and ramp hard. The rest of the world is not going to sit around and watch the US Dollar crush their economies.
I believe this will be the catalyst that causes the stock market to comedown and it may come down hard. I flipped bearish at 2245 and I am sticking by this call. I was early but this is an unsustainable trend and we NEED to come down back into the range to prevent this from blowing off.
Watch out Tonight…this triple inside day will be breaking 1 way or another.