The Markets Are More Broken Than We Thought

Investment Research Dynamics

Not only has volatility ramped up and several NYSE Rule 48’s issued over the past week, but now the ETFs are broken. I’ll have more to say about this in a future post but Bank of New York, which is the custodian for a large number of ETFs, has not issued an updated price for any of its ETFs for a week.  And today the VIX ETFs were behaving like apes on LSD:  VIX ETFs Are In Crisis Mode

The Fed’s points of interventions have become more obvious by the day and it’s becoming more obvious that the Fed’s ability to prop up the stock market is losing traction:

Either the massive stock market bubble is finally bursting or the Plunge Protection Team is letting the stock market drop so they can blame their decision to defer raising interest rates again in two weeks on China.

Some of the stock bubble angels have fared better than the S&P 500, but that will soon change, as many of them have a high beta vs. the SPX, meaning that they move a lot more in either direction than the overall market. My favorite “bubble angel” is Amazon.com – click to enlarge:

AMZN gapped up at the end of July on its aggressively promoted Q2 earnings report. It trended sideways for several days and filled that gap on last weeks stock market sell-off. It bounced, along with the SPX when the Fed pumped the market back up and it has rolled back over the last two trading days. So it filled that break-away gap from the end of July, bounced and has re-filled that gap.

The SPX has already crashed through its 50 and 200 day moving averages, now it’s AMZN’s turn. If the stock market continues to slide, the selling in AMZN will accelerate. Assuming the Fed’s continued attempts to prop up the stock market fails, AMZN will quickly shed another 100 pts down to its 200 dma.

My report on AMZN shows in fine detail why the Company’s Q2 earnings were a literal joke. AMZN trades at 45x EBITDA and 323,699x operating income.  To say that AMZN is “overvalued” is an extreme insult to the term “overvalued.”   The hedge fund community is loaded up on AMZN.  They will be looking for “bagholders” to whom they can unload blocks of AMZN.  The Swiss National Bank does not own any AMZN, amazingly, so I’m guessing they’ll pass on being a stool pigeon for the hedge funds.

You can read why AMZN is insanely overvalued in my AMAZON dot CON report.  Several readers of this report have already made several hundred percent gains from buying puts. My report has a section devoted to capital management and options strategies, if you are not comfortable shorting stock outright.

You can access this report  by clicking on the link just above or by clicking on this pic: