As I have been writing about for some time, the market has been rolling over. If you have time for only one chart, pay attention to the S&P500 falling below its 21 day moving average of prices a few days ago and today breaching its 50 day moving average (and while the most unfortunate inclusion of TSLA in the S&P500 could be part of it, a review of the charts shows the move involves more than just TSLA). Add a dramatic rise in the VXX. What is remarkable about the new downtrend is the fact that equities can go down despite a historic explosion in M2 money supply.
GME attracted most of the market’s attention, together with disruption in the universe of marginal names which all saw an explosion of volume and price (although bubble names like DASH could not hold on for more than a few moments). But the YOLO traders face an uncomfortable fact: their trade structure is doomed to fail unless they are able to attract an ever increasing volume of money. In other words, like any ponzi scheme, it can only go up with ever increasing flow. Once the flow stalls or falls price collapses. Given the time decay inherent in options these YOLO traders utterly depend on ever growing price (and thus flows) just to stay flat. But this week’s volume only saw GME hit the highest traded volume of all stocks mid week. Volume quickly tapered off and on Friday looked very ordinary. Consequently the GME chart is actually only gap up, trend down, gap up, trend down, not a good look at all (and certainly not something that would attract longs). While structural negatives also impact the trade (such as the increased capital requirements imposed on brokers by this volatility which in turn results in restrictions on user access and leverage) they are beside the point in this chart review as they would be incorporated in the price action. You do know, however, when YOLO traders start talking about conspiracy theories in reaction to their brokerage limits that this trading strategy does not depend on the acquisition of market knowledge.
As a side note I am astounded that not a single market operator mentioned that r/Wallstreetbets is in fact just a repeat of the pool operators of the 1800s and the 1920s (the media was focused on how new this all was). Of course in those days the pool operators would tend to be wealthy insiders and CEOs. I believe the CEO of GM at the time directed quite a successful pool but there were many such groups until they were banned. Did no one who writes about finance actually read Reminiscences of a Stock Operator? During that time the pools were a major force in the stock market and often moved stock prices.
steadily falling 
commodities have been hit for much of January 
when V is in trouble, consumers are in trouble 
breach of 20 and 50 MA 
breach of 20 MA after poor earnings 
20 and 50 MA breached 
lower parallel 
still falling 
breach of 20 MA 
breach of lower parallel still holding 
breach of 20 MA 
super strong PLUG stalled now 
breach of lower parallel; ominous sign for consumer as 200MA breached! 
20MA breached; downtrend forming 
clear downtrend returns to 20 MA after gap up on earnings 
despite strong earnings losing ground on breakout 
financials are fading; 20 and 50 MA breach 
really weak 
not even ag can survive as 20MA breached 
V and MA downtrend for a while; breach of 200 MA 
50 MA breached 
industrial air falling in clear downtrend 
like MS 
breach of 20MA 
steady India ETF breaching 20 and 50MA 
strongest tech is falling 
returning to 20MA it seems 
bounce off upper parallel 
sharp drop toward 200MA and support 
trying to hold 50MA but downtrend all year 
Dow is in trouble as 20 and 50MA breached 
insane $50 spike due to GME but trend is down since mid month 
bounce off lower parallel for now 
still in downtrend since December; breach of price box? 
insane spike on Pepsi news fading fast but very far from moving averages still 
oil in steady decline; lower parallel breached 
upper parallel to lower parallel 
fading from upper parallel; approaching 20 MA 
breach of 20MA 
breach of 20MA 
breach of lower parallel and 20, 50 and 200MA 
20 and 50MA support 
breach of 20 and 50 MA along with lower parallel 
sharp drop off upper parallel 
breach of 20 MA and upper parallel 
breach of 20 MA from upper parallel despite earnings
There is some suggestion that the troubles hedge funds ran into when dead businesses suddenly rose 100% or more in a day caused them to liquidate what they could and thus tank the entire market is an interesting idea. I doubt it helped but I rather think the signs of divergence and weakness were present (and written about here) before the GME blow up. But that is beside the point. The charts are showing a clear trend now. The presence of these late stage bubble events serve as yet more warning that the trend change should be taken seriously.
Felix qui nihil debet 