Everyone drawn back in

But it is still a bear market

Nothing has changed under the surface. The violent, Ukraine rally, is typical bear market activity — violent upswings, shaking out shorts, drawing back in all those trying to call the bottom to a drop based on sensations of a market being “oversold.”

If anything has changed, it is that energy prices can be expected to goose inflation numbers further. The effect of this, on real earnings, cannot be overstated. Real earnings are already running their most negative in seventy years - even real forward earnings, which are generally, and chronically, overly-optimistic.

The Fed has done nothing yet to combat this, and the Ukraine situation provides the cover for further foot-dragging. As of this writing, the Fed’s total assets are the greatest they have ever been in history:

Yet rates are rising, and stocks are down on the year nearly 8% and we’re not even two months in. The puffing is failing, God only knows what turmoil hits if and when an actual drawdown on the balance sheet begins, and rates go up. In the past four weeks alone, the total Fed assets have grown by another 55 billion.

More on the longer-term, the market is still grotesquely, historically over-priced — a bubble the magnitude of which has never been seen, which has already begun rounding over.

The ten-year rolling real total return of the S&P 500, still in the long-term “sell” zone of +10%/year (despite such low dividend percentage payouts):

Credit market quality spreads have not, in the past two days, bounced back commensurately with stocks, though they have come back a little, they are still calling for a major market hit in the near term:

We’re still working the “Floorbanger” signals, which register when the common technical characteristics of major drops are registering:

And we haven’t had high enough volume, on the daily or weekly charts, to justify Thursday’s low as being the terminus of the drop, nor has f4-f7 of Vix futures registered a negative enough reading to call it the end of the drop:

Nor have we experienced a “Drop Terminus” reading, which has a good, historical track record for calling out bottoms in short order after they have been put in (which is not to say we might not get such a reading in the next couple of days, however):

Anything can happen in the news here. We’ve witnessed already the top of a gigantic bull market - a bubble, and have only started to drop. What we are witnessing is classic bear-market reactions. It’s no longer “Buy all dips,” but rather is now “Sell all rallies.” This is a perfect one to sell into if you get the chance. Bear in mind, we have not yet had a single day of punishing selloff, but rather a slow grind sort of thing. We’re bound to have punishing-type days of selling coming up.

If you are short, do not be deterred by the sudden, violent runnup as we have just seen, or all those who have been sucked into it congratulating each other. This has a long, long way to go and can resume any second now, given the skittish nature of reactions to goings-on in the news cycle.