Last June these pages wrote about Blindfolds and Cigarettes as certain equities began to be executed by the bears, one by one, with only a smoke and a blindfold offered to those brave souls who held on to the equities to the very end.
Awakening this Saturday morning to two days of market carnage and sudden realization that the US economy may well implode this year suddenly has shocked the average investor into a costly state of awareness that the generals were taken out and shot this week.
Let’s start this review with a brief explanation. I believe it was the late great floor trader Art Cashin who, during the 2007-2008 market crash, used the phrase that the market was passing out “blindfolds and cigarettes” to the generals and shooting them one at a time. That phrase stuck in my head as the economic system began to unwind and credit markets seized the day which made equity traders realize just how screwed up things had become when Bear Stearns imploded in all its glory.
The S&P 500 this week demonstrated that the smart money knows how to liquidate orderly and escape before the sheep realize that they are broke. This was not panic selling although NYSE internals were of a capitulation nature, the NASDAQ nor total trading volume confirms this was the so-called “big one” as written in these pages on Thursday.
Let’s review the weekly chart first to see where the markets are and just how much damage was done.
The technical and emotional damage exhibited in that chart above does not even reflect the risk factors to further downside action. While much of the smart money has been distributing equities for months, all one has to do is look at social media to realize that retail is still of the “buy the dip” mentality thinking that the Federal Reserve or even the government will always bail them out of poor financial decisions; as they have since 2001.
The reality really hits home looking at a daily chart where a glaring gap this author has been warning about is clearly on display,
The index looks bad. But a review of the former generals who lead the charge to the double top is in order along with a moment of silence for those permabulls who preached “stocks only go up” and now are learning that the phrase “Margin Call” isn’t just a movie.
Let us now take a quick look at some of the generals, aka, the “Mag 7” before they were issued their blindfolds and Camel filterless smokes.
Apple (AAPL)
Amazon (AMZN)
Google/Alphabet (GOOG)
Meta/Facebook (META)
Microsoft (MSFT)
Nvidia (NVDA)
Tesla (TSLA)
There is a ton of fundamental reasons for all of these equities to drop further, but without committing a chart crime by marking them up further, let us just leave this at the gaps or going to be filled to the downside with this next bear market. Some of these equities, will do so sooner rather than later.
I hope those equities enjoyed their final cigarettes before Mr. Market executed them this past week.
