Ignore Today’s Stock Market, Watch the Smart Money

by John Galt
June 28, 2016 21:30 ET

POINDEXTER_REVENGEOFNERDS_tn

Poindexter and the rest of the nerds are trying to send you a message.

Can you hear them?

Maybe this will help:

062816_WSJ_MKTCLOSE_STATSjgfla

The oversold market finally had a dead cat bounce. Why does anyone with a brain call it that? Look at the volume last Friday:

062416_BREXIT_USMARKETS_jgfla

Today’s “rally” was not even close to the panic selling levels nor yesterday’s volume totals. So what indicators are telling the truth about the equity markets?

The smart money; which does it every time during every crash and 99% of all crises real or not. These four charts will provide a hint:

062816_GERMAN10YRjgfla

062816_JAPAN10YRjgfla

062816_SWISS10YRjgfla

062816_UST10YRjgfla

Until the US 10 year yield breaks back above 1.70%, the Swiss 10 year above as crazy as this sounds NEGATIVE (-)0.25%, the German 10 year bund back above 0.15%, and the Japanese 10 year yield above 0.10% there is little or any incentive to move out of these instruments as long as governments are promising to dump liquidity ad hominem and buy anything and everything at a higher price than one paid for it yesterday, today, or tomorrow. The equity trend will continue to lurch up and down between rally mode and correction however now it has a downward bias as more money is fleeing the speculative frenzy of stocks for the stability of guarantees on the return of principle.

Equities might bounce but the smart money is pointing to a much more prolonged crisis as the world’s central banks have painted themselves into a corner filled with razor blades, broken glass, and expired Weimar bonds. Someone has got to be willing to inflict some pain and return normality to market forces otherwise the demise of free market pricing mechanisms will only lead to much greater and more dramatic crashes that what we witnessed last Friday; or in 1987.

 

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