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Everyone Bought the Fake Stock Rally – Except the Smart Money

28.04.20 20:20 ET

The VIX has been artificially crushed.

The speculators who bet that the market had further to fall have been artificially squeezed.

Short selling is banned by the Fed in every aspect of our markets except vocally and legally thus destroying legitimate price discovery.

And after all that what did we hear in the past week on used car salesman financial “news” television?

Yeah, we’re in a new bull market before the recession has “officially” started. I don’t know who this clown is. However my old readers and listeners remember this mantra in 2007 and 2008 and wonder why the same people recycle the same bullcrap until stupid people burn up their retirements and then cry as they drink sterno under a bridge after becoming homeless.

The truth?

The oversold bounce in the broader stock market is winding down as today’s crushing intraday high volume reversal indicates:

I warned about the dangers of a massive bear market waterfall on February 27th, and here we are again.

The difference this time? The level of US Treasury yields despite massive Federal Reserve manipulation. The smart money did not liquidate their US Treasury holdings to buy equities and that is truly a scary sign.

The 2 year yield, well, is face planted at 0.20% until it gets the chance to test 0.00%:

The 10 year US Treasury yield tried to close around 0.25% but hasn’t made it yet:

The good news is grasshopper, there is still time and pain on the side of Gary Schilling.

Once we break 0.50% on the 10 year and 0.10% on the 2 year, odds are the next leg of the equity decline has begun. Despite the happy talk, political cheerleading, and sudden discovery of nightly prayer vigils in front of the Wall Street Bull statue in violation of social distancing standards in New York City, odds are the markets will retest the lows of early March and blow through them in the month of May establishing a lower low after a lower high.

All bets are off even more so if the COVID19/Coronavirus news from the Southern Hemisphere indicates a mutation or more dramatic outbreak in the Tropics. Thus my target low for 2020 of 1290-1300 on the S&P 500 remains intact until further notice.

You mileage and ability for your retirement to survive may vary.

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