The first three weeks of 2022 have been brutal for risk assets including stocks and crypto. Long forgotten is the traditional Santa rally and cheerful Nifty price targets seem much farther away.
The bubble warnings voiced last year due to unprecedented liquidity were largely ignored, investors piled into unrealistic valuations while internals slowly deteriorated last year as indices maintained their trends and now it’s ended in a valley of tears as wide price ranges simply got taken out in a matter of a few weeks.
“the party is rapidly coming to an end and the Fed will want to curb inflation without causing a recession which will be a real task. How to accomplish it? Easy, let markets drop, but not so much that it causes a systemic event but enough that year over year inflation numbers drop, declare victory and then flip flop policy again to prevent any major damage to markets by the time midterms are on everybody’s mind.”
So with rate hikes coming and the Fed supposedly rolling off its balance sheet will the index not continue to suffer? It may well do that and for me, that then offers a long-term entry point, as I sense the correlation dynamic will change in due time.
The one-trick pony of ever more intervention successfully and repeatedly employed by central bankers time and time again is seeing the previously denied consequences unraveling before our very eyes and the events of the last few months were really the last straw for me.
This is a warning as to the show that's coming: The largest U.S. ETF flash crashed yesterday, but no one noticed.
Yesterday saw the biggest Nasdaq reversal day since Oct. 10th, 2008. Nasdaq highs-lows were the worst since Mar.
2020 and before that... 10/10/2008 .
The burden of truth will remain on those who tell the truth until this is all a smoking fucking crater. Never seen this before. The only thing that came close is 1998, a 20% correction that ended up being a massive buying opportunity for a blow-off top move coming.
The first conclusion I draw from these charts is that this sell-off in its current state is one of the worst we’ve ever seen in terms of the underlying damage inflicted on individual stocks. But given the time references, there is also an opportunity to erase these most extreme readings before the end of the week and month. We have 2 trading days left this month and a monthly read like this is simply unprecedented. So there is a lot of opportunities to change this reading for the better on a monthly close.
Putting ALL 2021 buyers underwater.
We are very oversold and there is plenty of bounce motivation to be had in the days and weeks to come, but be absolutely clear: There is not only tremendous carnage that has taken place but there also is massive technical damage inflicted on charts with lots of trapped supply above all of which will be resistance on the way up and as long as indices can’t get above their broken moving averages risk remains lower.
My base expectation for 2022 hence will be much broader price ranges in indices and for the things that haven’t mattered to matter again. This expectation has already come to fruition and 2022 certainly is already a very different year.