And then The Never Ending Market Rally ended. With a tweet no less and $VIX exploded 82% higher just days after $VIX futures net short positioning reached an all time high. Knuckleheads.
Look, technicals matter greatly, but so do sentiment, the political, macro, and central banks, and the structural. It’s a complex web that can be very confusing and is challenging for market participants. Navigating it all is very tricky and I want to use this edition of the Weekly Market Brief to offer a reality check on markets but also share some key technical lessons as an educational tool to help others in making sense of everything we see unfold and how to identify short and long exposure risk/reward.
First some reality check points:
To re-iterate: The 2019 rally has not been driven by earnings growth:
Not even close. If anything earnings growth was barely flat in Q1 and is regressive for Q2.
The rally has also not been driven by fund flaws:
I repeat: The 2019 rally has been inflated by 3 main pillars that have exacerbated the move beyond the technical oversold readings off of the December lows:
The central bank pivot with the Fed caving 180 degrees and serving again the Fed put on a platter.
Record buybacks courtesy US