Wall Street Wins Again As GameStop Becomes Game Over

It is illegal. It is manipulation.

Wall Street turns a blind eye to their large hedge fund accounts that routinely participate in these illegal transactions because of the large fees they collect from them. These institutions are actively facilitating the destruction of shareholder value in return for short term windfalls in the form of trading fees. Wall Street, not retail investors, are the problem and are complicit in aiding hedge funds to create counterfeit shares.

Given that Wall Street’s regulators are effectively owned, including the Federal Reserve and the Treasury, there is little incentive to “fix” the system. It is much easier to punish a retail investor for playing the same game and calling it a victory to appease the media.

As I stated last week, Wall Street wins again.

Correlations Breaking Down

Bob Farrell once quipped:

“Bull markets are strongest when broad and weakest when narrow.” 

Currently, the number of stocks outperforming the market is dropping sharply. Such was a point SentimenTrader made on Thursday:

“It’s a truism of markets, lasting decades if not centuries, that when investors panic, they sell everything together. When they’re comfortable, they buy and sell securities on their individual merits.

That’s why we see correlations among stocks and other assets rise during times of anxiety and fall during periods of complacency. This is notable now because the correlation among stocks in the S&P 500 has plunged to the lowest level in over a year.”

What is also notable is that these periods of low correlations have typically aligned themselves with previous market tops. While the topping process can take some, and generally long enough for investors to dismiss the warning as “wrong this time,” the subsequent correction can range from mild to more extreme.

As with all indicators, the problem is the indicator doesn’t define what type of correction it will be.

Dollar Risk Rises

As I noted in Friday’s report:

“The market is currently priced for perfection betting on explosive economic growth, a falling dollar, interest rates remaining low, consumer spending surging sharply, and inflation remaining muted. The reality is that none of those things will likely turn out to be the case.

The one thing that always trips of the market is the one thing that no one is paying attention to. For me, that risk lies with the US Dollar. As noted previously, everyone expects the dollar to continue to decline, and the falling dollar has been the tailwind for the emerging market, commodity, and equity “risk-on” trade. Whatever causes the dollar to reverse will likely bring the equity market down with it.”

Very quietly, the dollar has been rising and recently broke above its 50-dma. With a substantial net short position outstanding, a further rise could trigger shorts to begin covering, pushing the dollar up further.

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Alexandra Gray 2 months ago Member's comment

The problem is the trapped bears feel a need to post negative comments to protect themselves from losing millions.