Closing Market Report: Feb. 14th, 2024

It was a boring session compared with yesterday. The market ping ponged up and down all day. Breadth was strong on both exchanges.

On this chart we see in the bottom pane that yesterday was the first 90% down volume day of 2024. We also see the S&P had a doji at the top, a doji yesterday, and today the bots tried to fill the big open gap.

It would be hard to argue that speculative appetite was reduced by yesterday's selloff, when as I showed on Twitter today the leading stocks/sectors are STILL AI darling SMCI and Bitcoin. It should come as a stark warning to bulls that the junkiest assets are now considered "safe havens" from meltdown, but of course it does not.

Recall that during 2023, Bitcoin derivative plays such as Bitcoin miners, blockchain stocks, Coinbase etc. all massively outperformed the rest of the stock market. But then when 2024 dawned and Bitcoin spot ETFs were approved, the derivative stocks imploded. We see this via the ETF below.

Now they are clawing their way back to a lower high and therefore NOT confirming this latest high in Bitcoin which itself is not an all time high, since the Bitcoin Trust peaked way back in February 2021.

Which should serve as a warning for what is about to come, but of course it does not.

On the subject of interest rates, here we see that 10 year yields have now criss-crossed the 200 day moving average. Can they go higher short-term, yes.

However, in any real risk off scenario, yields are primed to go lower.

Which gets us to $USDJPY, the global carry trade. Bulls are adamant that it's going to take out 150 on the upside and never look back. Here we see it's at a triple top due to yesterday's CPI print, having been stopped again at the same level bulls insisted it was going much higher the last two times.

Suffice to say, in any global risk off scenario as discussed above, lower U.S. bond yields portend a smash crash lower in the carry trade, which is now orders of magnitude more levered than it was in March 2020.

Which will make the Fed's monetary bailout "challenging" when the market goes limit down as soon as they cut rates.

Again.