The Market Perspective

EWI at Money Show

Tuesday March  30 2021

Steve Hochberg made a 25 minute presentation at a recent Money Show.  Steve is the Chief Market Analyst for Elliot Wave.

His presentation features numerous charts showing this is the most over bought market perhaps in history. I suggest you watch.

https://www.elliottwave.com/Free-Reports/special-presentation-markets-mayhem-and-elliott-waves/Signup?utm_medium=aff&utm_campaign=cr-mmew&utm_content=eml&utm_term=affem&acn=11tmp&utm_source=11tmp&rcn=affem

 

Email/Web Copy Link: https://www.elliottwave.com/Free-Reports/special-presentation-markets-mayhem-and-elliott-waves/Signup?utm_medium=aff&utm_campaign=cr-mmew&utm_content=eml&utm_term=affem&acn=11tmp&utm_source=11tmp&rcn=affem

Archegos Capital Mismanagement

Tuesday March 30 2021

Here is another story on Archegos meltdown last Friday.

https://finance.yahoo.com/news/one-world-greatest-hidden-fortunes-002617417.html

I wonder how many more Bill Hwang's are out there, borrowing more and more, higher and higher leverage, and losses all around when the margin calls  arrive.A popular idea in the late 1980s was the concept of portfolio insurance. But when the sell off hit in October 1987, PI made the selling just that much worse, the opposite of what a hedge was supposed to do.

this reminds me of Long Term Capital Management.

https://en.wikipedia.org/wiki/Long-Term_Capital_Management

not all fraudsters intend to defraud, consider  the case of Nick Leeson who destroyed Barrings Bank.

https://en.wikipedia.org/wiki/Nick_Leeson

Archegos Capital Midmanagement

Advance Decline Give Early Warning

Tuesday March 30 2021

The single most reliable indicator is the A/D line. It is not supporting the new high in the DJIA. It represents the far broader entire NYSE market.

NYSE Summation Index is sending the same picture.

Please read the front page stories about Morgan and Goldman dumping their exposure to an over leveraged fund, leaving the other banks in the deal with far larger losses.

Once markets turn the last out the door has a lot of regrets.

all the positives are baked into the market now

Goldman and Morgan Have but One Client - themselves

Tuesday March 30 2021

Viacom  CBS and Discovery were hit with huge losses this past Friday. Here is what happened. One wonders how many stocks have been run up in such leveraged fashion, only to face savage liquidation in a margin call. Could such a margin call across multiple stocks  create a waterfall of selling? The following is excerpted from a WSJ article this Tuesday.

_________________

 

Goldman Sachs Group Inc. and Morgan Stanley were quick to move large blocks of assets before other large banks that traded with Archegos Capital Management, as the scale of the hedge fund’s losses became apparent, according to people with knowledge of the transactions. The strategy helped limit the U.S. firms’ losses in last week’s epic stock liquidation, they said.

Losses at Archegos, run by former Tiger Asia manager Bill Hwang, have triggered the liquidation in excess of $30 billion in value. Banks were continuing to sell blocks of stocks linked to Archegos Monday, traders said.

“This is a challenging time for the family office of Archegos Capital Management, our partners and employees. All plans are being discussed as Mr. Hwang and the team determine the best path forward,” a company spokeswoman said in a statement Monday evening.

Archegos took big, concentrated positions in companies and held some positions in a mix of stock and swaps. Swaps are a common arrangement in which a trader gets access to the returns generated by a portfolio of shares or other assets in exchange for a fee.

 

Losses threatened to spill over into the so-called prime brokerage businesses that have been handling the firm’s trading. The group of large Wall Street banks includes Goldman, Morgan, Credit Suisse Group AG, Nomura Holdings Inc., UBS Group AG and Deutsche Bank AG , said people familiar with the firm’s trading.

Archegos Fund

• What Is Archegos and How Did It Rattle the Stock Market?
• Archegos Liquidation Hit Nomura, Credit Suisse
• Who Is Archegos Fund Manager Bill Hwang?
• Unraveling Archegos Fund Shows Risks of Investment Banking
• Stocks Waver as Banks Warn of Losses

On Thursday, Archegos asked banks handling its business to meet to hash out a strategy to liquidate its holdings, said a person familiar with the meeting. The firm’s largest positions had turned sharply negative following a long run-up. A proposal emerged for all the banks to hold off on large trades and to talk further over the weekend, but the call ended without any agreement.

On Friday morning, banks started seizing Archegos’ stock, and Goldman Sachs started selling in size. It quickly became clear there would be little to no coordination among the banks.

Goldman and Morgan each raced to liquidate positions tied to Archegos.

On Borrowed Time

Monday March 29 2021

the internal s are negative, indicators will not update on stockcharts until later today but declines outnumber advances,

the summation index continues in a downtrend, advances versus declines.

 

We have been way too agressive on the downside, it is now happening but ever so slowly to keep as many sanguine about the markets.

Bond prices are still falling, yields rising, thanks Joe Biden and the  39 year cycle.

 

TBF Reverse interest rate fund

this seems too short for a 4th wave but considering /congress just spent  5 Trillion  it does not have or will with the next spending bill, maybe not

 

Divergences

Weekend March 27 2021

 

Here is one possible interpretation of where we are. If correct the DJIA heads down next week. If not we go to new highs.

Divergences

Record option volume

https://www.cnbc.com/2021/01/22/trading-volume-is-up-so-far-from-2020s-breakneck-pace-as-retail-investors-get-even-more-active.html

Record new account openings

https://www.cnbc.com/2020/06/17/robinhood-drives-retail-trading-renaissance-during-markets-wild-ride.html

Tesla Viacom CBS, Discovery breakdown see previous post

Speculation in SPACs and firms with no profits

https://www.fnlondon.com/articles/mark-mobius-yep-were-in-a-bubble-especially-in-crypto-20210304

But the markets don't seem to care

 

 

 

Sudden Fallout

Friday March 26, 2021

We have some sudden reversal sin large held stocks that are significant.

TESLA

We mentioned this in our weekly newspaper column a couple weeks back noting that no one was discussing how this darling is dropping.

CBS Viacom

Discovery

VIX now trading near last February  2020 lows, and then the markets fell apart

Evidence of a Market Turn Mounts

Friday March 26, 2021

Evidence of a Turn Mounts

Six weeks of increases have put the

30 year fixed rate mortgage at its highest level in nine months-3.17%.

Mortgage Rates Hit 9 Month High, Washington Post

This column has been warning of turn in the 39 year bull market in bond prices (lower rates) for weeks.   This past week brought more evidence this is the correct analysis. And the stock market is beginning to notice as well.

Interest rates fell from the 12-14% level of 1981 to less than one Percent in May 2020. The thirty-year bond yield is now 2.356%, tripling its yield since then.

This is confirmed by the huge rise in commodity prices. Dr. Copper is up from 2.9 cents last October to 4 ccents per pound today. Lumber has doubled from $450 per 1,000 board feet to $900.

Crude oil has also near doubled in price but is on borrowed time. Price lifted from $35 las October to $65 but now less than $60 at 58.56. A week ago it was announced that world demand for gasoline had peaked given covid restricted travel and the move to electric vehicles. With summer driving season, or what will amount to that, upon us 87 octane is near $3.00.

A bull market in stocks is marked by an expansion of new hghs. More money lifts prices of more stocks. That indicator collapsed this past week. Two weeks ago the NYSE new highs reached 700+. This past week it fell to 146. Conversely the number of new lows exploded from 20 to 200+ in the same period. This phenomenon is known as a broadening top. The late comers, a surge in first time speculators opening new accounts, are buying from those who purchased at last March low at DJIA 18,000.

And none of this should be surprising. Congress passed a Trojan Horse Covid Bill of $1.9 Trillion which was really a bail out for poorly managed municipal pensions, all in Democrat controlled states and cities.   Now another $3 Trillion stimulus is being planned. Like Barack’s non-shovel ready bail out, this will likely be a pay off to unions and poorly run Democrat cities like Chicago, Baltimore, and NYC.

The plan is straight out of the Hugo Chavez playbook. Simply raise taxes on the ultra-rich and the hated corporations. Believing the tax will not affect them, who in the lower income levels would object? But the parable of killing the golden goose is applicable. Lon- term studies of federal revenue reveal that no matter what tax rules are passed, the take is never more than about 18% of GDP. The wealthy can and will move, and adjust income streams. They are migrating from CA and NY high tax states; the same will happen with s-called soak the rich plans, wake up Bernie.  Congress targeted oil companies believed to make excess profits in the early 1980s.   The result was not more revenue but an exodus from North American production. In Andrews at that time, both Exxon and Amoco abandoned their large modern buildings and employees. It simply made the real estate crash of 1987-86 just that much worse.

We have seen this before. It does not end well

Hard to Make Much of This

Thursday March 25 20221

Treasuries off to thrid worst start of year since 1830

 

this is what we have been saying, bond prices are dropping and for two reasons

We had 39 years up in yields to  1981 and then 39 years down in yields, time to reverse

Congress is spending like crazy, gasoline prices are nudging $3., housing prices are soaring, lumber prices have doubled since October

IN the same peeriod copper prices have risen 50%

\Yellen and Powell are flunking Eco 301 if they think this is not going to lead to inflationary price increases, it is already doing so