Even red-hot Twitter can't save this market
Stimulus fatigue is setting in, and short sellers are seeing new opportunities as a breakdown emerges.
The bulls are foaming at the mouth over the debut of Twitter (TWTR) and the second coming of dot-com mania.
Everything looked set for a surge to take the Dow Jones industrials ($INDU) up and over multimonth resistance on a flurry of greed and hype of the kind not seen since the late 1990s. Only, this time we have the added impetus of the "never will it end" monetary policy stimulus.
It wasn't supposed to be this way. Futures were up big premarket after the European Central Bank, in response to rising deflation risk and massive youth unemployment in countries like Italy and Spain, cut its policy interest rate to a record low of 0.25%.
This, like the Federal Reserve's no-taper decision in September, was a surprise, as most people expected action in December after updated economic forecasts were released.
Yet European stocks melted lower, an overnight ramp in U.S. equities futures has been completely reversed. The Russell 2000 small cap index has lost its 20-day moving average for the first time since early October debt ceiling scare. Emerging market stocks are in even worse shape, with the iShares Emerging Markets (EEM) losing its 50-day moving average for the first time since August.
Part of the problem is that stimulus fatigue is setting in. Another 0.25% off of Europe's short-term interest rates isn't going to do much when total production in Italy has fallen back to recessionary lows and youth unemployment in places like Spain and Greece is off the charts.
Foreign favorites like Baidu (BIDU) are also suffering.
That's creating opportunities for short sellers in a weakening market as portfolio managers apparently need to sell older names away to add Twitter to their holdings.
The technical breakdown underway in the broader market is significant given how extreme bullish sentiment had become. Jason Goepfert at SentimenTrader notes that the sentiment of newsletter writers like me has reached levels that haven't been seen since at least 1997, active investment managers are carrying their heaviest load of market risk in seven years, and the ratio of assets in Rydex's bull and bear funds has reached levels preceding the last three market corrections.
Thursday, I added a short position in Facebook to my Edge Letter Sample Portfolio, which includes a short in Tesla that's up 15% since I added it on Oct. 29.
Disclosure: Anthony has recommended TSLA short and FB short to his clients.
More from Mirhaydari
The US financial markets are dominated by toys and the financing required for the production and distribution of toys. Take a look at NASDAQ, Lots of 'nice to have' but not necessary products. If you really, really want or need to invest think of firms that produce things that people need and that these firms have proven to meet consumer expectations.
The real fatigue will happen as people wise-up to the massive and useless time suck of social media and these companies sink to a realistic niche in the market and second driver, people begin to understand the consequence of putting their lives out in public and massive data compilers and resellers.
oh by the way: obama alone has 20million fake followers, that's right you idiot lefty obamazombies, your grand high exalted mystic Marxist muslim mendacious ruler has 20 MILLION FAKE FOLLOWERS!! hehe doesn't surprise me in the slightest!! figures! actually I believe he's got 2 legit ones if any, his arrogant manly wife and his sorry black marxist azz!.....
i had no doubt TWTR would do well as an untapped and also untried resource. i would not state as a trend but we are seeing more investment in youth oriented by younger like a collapsing bridge to what once was. current gov't policy may be contributing to that as taking personal capital by force to support what is not youth oriented, don't think i need to name it.
I'm in total agreement with Anthony for a change....
Something afoot, but yet to be determined...The Good, Bad, then maybe Ugly..?
Bull Markets are born on Pessimism,
Grown on Skepticism...
Mature on Optimism and die on Euphoria.
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These hot movers could rise by double digits in coming months.
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