The Global Liquidity Crisis is setting up US Equity Markets for a SEVERE Drop within the next few weeks, that will remove evidence of the manipulation that drove the impressive retraction from the 24th of December 2018, (which was the day that Grinch mugged Santa and stole Christmas). The V-shaped pattern being generated from events post and prior Grinching has only been seen 3 times in the past 100 years and confirms a 95% Probability of a revisit to the lows of December 2018, (and to points beyond further below). The current CTAs are sitting sharp at 2773 on the SnP waiting to catch the hook to ramp to MAX SHORT and generate momentum and release liquidity into the money markets.
CTAs are Commodity Trading Advisers which is another name for High Frequency Trading (HFT) Machines of Hedge Funds; who are the liquidity providers of last resort in “dry times”, especially now that the US Federal Reserve is at its maximum asset buying capacity, (any more buying now will create inflation and that will in turn force the US Fed to raise Interest Rates; which will immediately crash the Stock Indexes).
A mildly controlled demolition via CTA Machine Momentum is the current playbook. The Fed has been caught in a trap by the present US Administration which uses the Stock Index as a Report Card to showcase the positive effects their policies are having on the US Economy. An Artificially Over Valued Stock Market creates the illusion of a prosperous economy with a glowing GDP, which raises the spectre of Inflation. If the Fed raises Interest Rates now to counter future anticipated Inflation, the Indexes will crash, however, the creation of the V allows the Hedge funds to gently adjust the numbers down to where the evidence of the manipulation is erased.
The V DropDown pattern is unfolding clearly and the Drop is CERTAIN to play out within the next few weeks, (that is without a doubt). It needs an Event to Trigger the CTAs, and the ONLY Question to ask is what will be that Event?
The CTAs are being currently primed, (on the Trigger Event), to race to 2300, then engage a weak retraction and finally, settle at 2100 on the SnP. On the Dow30, the final point may be well below 21,000. The dangerous problem is that this could have the unintended consequence of pushing Deutsche Bank into the “dark” and recreating the 2008 Lehman Brothers disaster, this time in the heart of the EU.
DB going dark can only be countered by shutting down ALL Global Exchanges; as they hold on their books Notional Derivatives that are more than 7 Times that of the Entire World’s GDP.
VIX, or the Volatility Index, is being massively artificially compressed in order to levitate the US Indexes with “low to near zero” liquidity, in other words no one is actually buying stocks; they are being “spoofed” on the Futures Exchange. VIX is showing itself to be just waiting to suddenly uncoil ferociously, and to then rapidly target the 20s and perhaps 40s on the scale, corresponding to the lows of December 2018.
A rising VIX corresponds to a falling Stock Index, specifically the SnP.
Simulations and War Gamings work best in theory but in real life things can spiral out of control towards a chaotic loop that will have to be allowed to play itself out until it loses energy and settles down.
Supratim Barman, MSc Queen Mary University of London
Kolkata, 12th of April, 2019.
Supratim Barman 