We said a stock melt up might happen.
Is it happening?
If you simply type “stock melt up” into Google, a pretty perfect definition shows up right at the top.
Melt up refers to a sudden improvement in the price of a security due to investor sentiments. Melt up occurs when investors flock into buying assets based on greed rather than fundamental improvements in the stock market.
So in other words, stocks aren’t gaining in value. The number is simply going up, nothing more.
Now unfortunately, there are no defined parameters for how far a market has to go to be considered a “melt up”, nor is there anything listing how far down the drop typically is.
Would have been nice to at least see something usable as far as that goes.
Been Told You
So the idea of a big melt up before a horrendous crash down has been bandied about for most of the year now.
But the pieces haven’t lined up perfectly until now.
Credit to Michael Gayed for being super annoying on Twitter and calling this out every hour on the hour, but if it does follow through, it would make a lot of sense.
After a year-long decline, Wall Street is looking for ANY sign of ANYTHING to attempt to get some of their money back.
Fund managers are SCRAMBLING for a reason to go long and recoup some losses so their clients don’t fire them.
“Give us anything!” “It can totally be fake, we don’t care, we’re on board” they cried out.
I made that last line up.
Or did I?
The CPI report on Thursday finally shows signs of inflation reversing.
Is it actually reversing though? Is this it? Only blue skies ahead?
Or nothing but a pyrrhic victory, and a very small one at that?
You pretty much know what I think.
Lest We Forget
Fundamentally, nothing has gotten better. Only worse.
In crypto, we have yet to see the knock-on effects of the FTX debacle. And they’re coming.
We still have not accounted for all the business lost during the pandemic. For all the fake money that was printed.
None of the 6 Crises have played out yet.
There’s still a war going on.
And 7.7% is still a really shitty inflation rate!!
The interest rate on the USD is still cripplingly high, despite where it might go in the future.
But hey, it’s fun to play make-believe, right?
Even the longs know this potential move up isn’t real.
Retail dimwits, as usual, will get all excited, but the big money knows, and they are trying to front-run actual nonsense. You read that correctly.
What YOU need to be aware of, is the calamitous fall that usually follows this move up, should it happen. One day’s worth of gains, no matter how large, doesn’t count as an official stock melt up, even if there are no official parameters.
We continue to have a heavy bearish bias, and hold most of our money in cash and cash equivalents.
Nothing you see here is financial advice. You and only you are responsible for your gains and losses.