Markets Meet The Maker

Circus Donny is about to find out who is really in charge around here.

In my last blog post "Now For The Main Event", I surmised that Trump was about to begin an imminent ground invasion of Iran, based upon the escalating build-up of ground troops. That scenario is still very much on the table, however Wednesday night Trump raged in his address to the nation that he is planning to bomb Iran into the "Stone Ages". Iran has made it equally clear they will retaliate by destroying Gulf States' infrastructure. So those are the two scenarios markets face in April, either one of which would implode global markets and the global economy:

It's clear now in hindsight that this past week's short covering rally based upon "the war will end soon" optimism was just another headfake. Trump has signaled several times since the war started that it's almost over and no further escalation will take place. Each time has been a massive lie. The cumulative effect of these short covering rallies has left the S&P 500 as overbought now as it was at the start of the war.

This is the recipe for a massive crash i.e. when price declines but the market can't find a low because dip buyers won't capitulate:

Of course the financial markets damage and economic damage is far worse in the rest of the world than it is in the U.S. - particularly in Asia. What makes things even more interesting is that at the Easter holiday, Asian markets are the only ones that are open on Good Friday and on Easter Monday. Which means that Asian markets will lead the global market collapse and the U.S. and Europe will follow next week.

Japan has been the locus of global collapse twice in the past two years. This is the first break of the 50 dma (blue line) since last April's crash:

Korea is another market on the verge of implosion:

India is already imploded.

Which gets us to the U.S.-based AI bubble. Here we see the leading AI momentum stocks have had a deep upward retracement. But implied (options) volatility in the bottom pane is almost as high as it was at the lows of last April.

Which means that we are on the verge of an EPIC volatility spike.

In summary, the war started in March. But now EVERYONE in the world knows that it will escalate in April.

U.S. investors and Trump are equally oblivious to the amount of pain this war is causing the rest of the world. Trump's fire and brimstone speech got bought with both hands in the U.S. prior to the Easter holiday.

Now it's time for the master market manipulator Trump to meet the REAL market maker. And see who comes out on top.

The Clown, or the ones that follow?