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Morning Market Review: Jan. 23rd, 2024

Overnight, the BOJ pleased the bulls by keeping short-term rates unchanged. For now, the spigot remains wide open. Which begs the question as to just how much this low volatility rally has benefited from the relentless Yen carry trade. As a reminder, this is the longest VIX contango since 2008, which means the spot VIX has consistently been lower than the futures VIX in a sign of extreme complacency. As we see below, prior periods of tranquility did not end well.

Overnight, the Chinese government announced another plan to rescue their plunging stock market. Which makes this all highly reminiscent of 2015/2016 when they pulled out all stops to support stocks, but in the end the Shanghai Composite lost -60%.

We should be on the lookout for how long this nascent "rally" lasts. One thing is clear - $278 billion doesn't go as far as it used to. Below we note that this last ditch rescue plan came at the critical 2022 low which incidentally was the beginning of the S&P rally.

Tonight, Tech earnings kickoff with Netflix:

I would be remiss if I did not point out that the last Tech top exactly coincided with Netflix earnings last July. In other words, once Tech earnings began, the rally ended.

Lastly, following tremendous amounts of hoopla surrounding the launch of spot Bitcoin ETFs which was followed by massive inflows of 401k retirement money.

Bitcoin is now in a bear market.

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