The Limbo Feeling Hot, Hot, Hot

If you are old enough to remember the Limbo dance game at a party, then you know it was usually accompanied by this song. 

And that reminds me of the current market landscape, where the clear consensus is that "they" (the White House, Congress, The Fed, etc.) will let things run hot, hot, hot in the markets and economy all the while talking down/away any notion of affordability issues to the majority of Americans.

Putting to one side the idea that this is a lousy political strategy (the previous White House tried just that and failed miserably when it came time for voters to opine in a major election), there is also an enticing contrarian setup in markets. 

Specifically, many of the Limbo players will eventually get caught too long (literally and figuratively, in this case) as the bar becomes more challenging as the markets rise and adjust expectations higher. Eventually, the Limbo game becomes unsustainable and the fun ends. 

Applied to the current market we have fund managers pretty much all-in long equities and quite bullish, sparsely hedging the downside as it seems like a futile effort at this point. And hence the contrarian setup. 

All that is missing, of course, is the meat and potatoes of a bonafide reversal to get the move going to the downside. 

Yesterday we saw the Nasdaq leading the charge higher for much of the session on the cusp of a multi-month breakout, seen on the QQQ ETF daily chart, below. But then an afternoon fade kept that breakout on ice, followed but today's softness in tech with Apple continuing to unwind lower. 

A move back below $600 on the QQQ is likely needed to confirm a major bull trap yesterday. However, an early new year rug-pull in a midterm election year would be entirely within the real of probabilities, despite how few market players are positioned for it. 

Elsewhere, seeing the gold ETF (GLD) green this afternoon despite volatility in the metals and miners of late is a tribute to the stickiness of this bull run in that asset class. Unlike tech, most retail and institutional players have a long way to go until they are out of line on the long side with gold.