Nasdaq (NDX) Over 400 points outside the upper Bollinger band!. That type of extension has never lasted and has never been sustainable. Repo and treasury bill buying is causing participants to engage in risky buying behavior, not pricing in any risk where risk keeps building.
That works until it doesn’t, but in case of an emergency you don’t want to find out that the real pilot in the cockpit may be a dummy, oblivious to everything around him. And a Fed in denial of what they have unleashed here, denying that there are any imbalances, denying that repo has an impact on asset prices and investor behavior, such a Fed may be too deaf, dumb and blind to steer markets through the emergency that they themselves will have created by setting up asset prices for an ugly reversion to the mean.
Given the ever exacerbated state of technical extensions and valuations this market is becoming ever more dangerous in terms of downside risk. But for now it remains on autopilot. Yet so ingrained is now the one way ramp mentality that when this market finally does drop nobody will believe it.
