What's the U.S. stock market going to do on Monday?

For the last 3 years or so, every time Asia and Europe got a weak day and the sell off started. ... the robotraders would be in the afternoon buying the dip and driving up stock prices more. People who played that game felt like they couldn't lose, and they got lulled into a sense of complacency. The Federal Reserve had your back and the computers were all trading in one direction. The Federal Reserve was hell bent on levitating asset prices, and people didn't fight the Fed (which is pretty smart). I was amazed that this didn't happen soon after they cut off the third round of quantitative easing. That removed a lot of liquidity that was feeding the whole bubble. But stocks held up on the fumes of what they did for several years to destroy our markets. Stocks didn't keep going up, but they kept resisting going down for about half a year. But still. ... I really anticipated a collapse when they pulled the bond buying.

I have no idea what will happen today. The futures are off their lows during the Asia session. I am prepared for a sell off this morning, but maybe not that much. In the back of my head I am prepared for a bounce off the initial sell off. I am not predicting anything, just could see that that happening -- especially if Jim Bullard or someone else from the Fed comes out and says something dovish about how they will never raise rates again or QE4 is on the table. When we got a bit of a sell off in October, they sent Bullard out to talk everyone down.

I actually don't think even they are that hamhanded. They will look foolish this time. And this does feel different. The selling on Friday intensified into the close.

It will be a big drop at the open today. What happens after that is anyone's guess.

This is all feeding off the currency markets. The dollar had really taken a run and it was the most crowded trade for the last half year. Everyone was piling into the dollar. It was pulling up the yuan with it. And the euro and yen were getting crushed on the other side of that trade. That trade is unwinding violently at the same time here -- it's about time from where I sit. Currencies shouldn't move that quickly -- it creates instability. The dollar index is off a lot in the last few days and it is down a lot more overnight. That doesn't bode well right now, because in this kind of environment when there is a mini-panic, typically, everyone wants to flee to the perception of safety -- which is the dollar. The opposite is happening. Which is downright weird in a normal environment.

In any case, this is going to be an interesting day. Oil was below $40 a barrel overnight and is showing it could go down even more. That is telling something. It's not just an oversupply story the way people wanted to believe. There are a lot of fears about how big a global depression we are in. With the dollar dropping, you should see oil bounce back a little. But the price is sinking like a rock. Which says global problems. No matter how much of a global depression we are really in, and how much the actions of the various central banks -- the Fed, the ECB., the BOJ -- have created asset bubbles all around the world the last 8 years or so, let's say I have been wrong about this all along. Even if you believed all of the spoonfed bullshit about the 2 percent growth the U.S. has supposedly been seeing the last 7 or 8 years. ... That is low growth, even if you believed it. Without the Federal Reserve helicopter dropping money and creating huge imbalances and speculative bubbles. ... there is no way stocks should have been up the way they were for 2 to 3 years with that little growth in the economy and profits not really growing except through accounting tricks and as a result of stock buybacks -- which were fueling stock prices. Stock prices should rise when profits rise. That makes sense. Profits haven't risen to justify what stocks did for a couple of years. But thanks to the central banks around the world competing to devalue their currencies and put off dealing with all of their country's debt problems, stock prices rose simply because of asset price inflation created by the Fed and the ECB and the BOJ competing to destroy their currencies. That NEVER ends well.

This might not be the big one. ... but global equities are still way overpriced, even with a pullback now. Stock AND bond prices have a long way down to go still before we can get back to normality. Especially bond prices. There is way too much debt out there, and it has been fueled by interest rate suppression by the Fed and other central banks. That has created a lot of very risky lending and overleverage out there. So in the end, it is the same story as 1999, 2007, etc. We are going to see a lot of defaults going forward and it permeates all parts of our phony economy right now. With oil plunging this much, it is starting with frackers in the U.S. that are getting killed and are starting to default on their loans which were given too easily and at absurdly low interest rates. Which is going to spill over into the entire high yield market -- which is in a massive bubble and is going to kill a lot of poor people who got stuck reaching for yield thanks to the Federal Reserve. Those fixed income problems if and when they occur, are going to have to make their way back to the "safe" debt markets. There is just way too much debt out there, whether it is a student loan bubble that we created to the tune of a trillion plus dollars or a subprime auto loan bubble that is going to fold under its weight at some point or U.S. government debt. None of this will end until we get the debt under control. But the Federal Reserve will do everything it can to put off dealing with reality. ... So the real question is if this turns into a stock market meltdown, will they back in with QE 4 and more bond buying / free money?

As for stocks today, though? Good luck if you are trying to trade it.

 

I don't know that I can live blog this today! I need to concentrate. ... But jeez, the futures (7:45 am) sure are acting like this is different. The S&P is close to taking out 1900 in the premarket and the NASDAQ futures are down close to 5 percent. Dow Futures are down 560.

The open is going to be ugly as anything we have seen in years. The question is whether you get some buying and stabilization later in the day. I wouldn't be surprised either way.

 

It's on. ... S&P futures took out 1900 handily about 5 minutes ago. Dow futures down close to 700 as I type this. This is going to be a tough open for anyone sitting long stocks.

This fascinates me. This was the case on heading into Friday and it is the case today. Either things stabilize today and we get a dead cat bounce of some sort -- it will happen eventually. Or this is going to be a stock market pummeling today.

There will be someone somewhere who bets on the bounce and is getting long as everyone is panicking.

And if we do get the bounce, they will be rewarded for having balls the size of watermelons.

If it doesn't happen, they are going to get run over by a locomotive. Unless you know something that 99.9 percent of everyone doesn't. ... it is gambling in its purest form.