Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Tyler Durden

Fri, 11/27/2020 – 13:01

Greed, Greed-er, and Greed-est…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: CNN

This level of extreme greed didn’t end well last time.

Interestingly, as the week progressed, Nasdaq caught up with Small Caps early-week outperformance, stalling the ‘rotation’ trend. The Dow was the week’s laggard but still managed solid gains…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

As a reminder, the recent vaccine headlines have put global and european-specific stock markets on track for their best month ever…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

And the major US equity indices on track for their best month since 1987…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

The Dow broke above 30k for the first time ever early in the week but was unable to maintain it…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Energy stocks continued their massive surge this week (though faded a little today) as Utes lagged…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

And as we noted earlier, Tesla surpassed Berkshire Hathaway in market cap for the first time ever…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

VIX flash-crashed intraday below 20 – its lowest since February…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

As traders dumped puts in favor of calls by the most since 2010…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

Treasury yields fell today after rising into Thanksgiving. 30Y remains up around 5bps on the week, 2Y unch…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

10Y yields rolled over at pre-election-spike levels (around 90bps) once again, shrugging off any vaccine growth hopes…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

The dollar tumbled for the 3rd week in the last 4, having plunged almost non-stop since the election…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

…closing at its weakest vs its fiat peers since April 2018 (and unchanged since Jan 2015)…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

Cryptos started the week strongly with Bitcoin closing at a record high, but ended weak with ETH flat and BTC -10% (and yes Ripple was up 140% on the week on Tuesday!)…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

Bitcoin fell from $19500 to $16500…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

On the week, copper and crude surged as PMs were purged…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

Gold and Silver were monkeyhammered this morning (coinciding with a forceful flash-crash in VIX)…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Gold is heading for its 3rd straight weekly decline, its 4th straight monthly drop and worst month since Nov 2016, breaking (and closing) below its 200DMA…

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Source: Bloomberg

Finally, some historical context from Michael Markowski. Two stock market sentiment anomalies have increased the probability of a correction near term.

The two anomalies are:

  • Thanksgiving Melt Up Anomaly. The average S&P 500 gain for 12 of the past 14 ten-day periods concluding November, was 3.5%. The only two exceptions, 2015 and 2018, were preceded by significant market corrections.

  • Bullish Sentiment Anomaly. Currently, there is a high probability for the S&P 500 to decline by 12.7%. Such would be from its recent 2020 high and would conclude by December 20, 2020. Based on the previous behavior, there is a 66% probability the S&P 500 could continue its decline in 2021.

The Thanksgiving Melt Up Anomaly is now driving the S&P 500 to a higher November all-time high.

The Bullish Sentiment Anomaly is the cause of a violent correction for the S&P 500 to begin in early December 2020.

The chart below depicts the four 45% to 59% Bullish sentiment readings which occurred near the all-time highs for the S&P 500. (2018 to November 13, 2020)

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

Within five weeks of the three prior Bullish Sentiment Anomalies occurring, the S&P 500 declined by a minimum of 9.7%. Two of the three total declines depicted in the table below were more than 100% greater than the five-week drops.

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped

There exists a risk of decline from November 13, 2020, through Christmas Day. Such is likely to occur precisely because no one expects it to. 

Trade accordingly.

Stocks Give Thanks For Fed Liquidity As Dollar, Gold, & Bitcoin Dumped


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