Friday, June 9, 2017

That Elevated Quickly

Wow.  Not very common to see a massive Friday afternoon Nasdaq selloff after hitting an all time high earlier in the morning.  What's even more interesting is that usually bonds would be screaming higher on this kind of equity selloff but its only been able to work its way back to unchanged on the day.

The weakness in the bond market while equities were flat was the tell.  This stock market is heavily dependent on low rates.  When there is any kind of bond market weakness, the air is just too thin up here above SPX 2400.  Not enough oxygen to keep the pumps going when money becomes even slightly more expensive.

That is why you will not see a big bond selloff to say 3% 10 year because then the wealth effect central bank game would be up.  And there is no way central banks are going to throw in the towel at this point.  With the world up to their eyeballs in debt, any significant move lower in bonds is enough to pressure equities lower.

After today, Nasdaq is officially on my short watchlist of macro markets.  The hot money is in Nasdaq, and whenever the hot money starts to crack, it grabs my attention.  This down move (with bonds not going up) only strengthens my conviction that we are topping out this month.  Get ready to short any rallies next week.  Best to put on a short during opex week, as post opex and corporate buyback blackouts (from Monday June 19) could be painful for longs.

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