Candy Crush IPO was crushed

The mania for IPOs is waning, I feel.  A few years from today, people will stare in disbelief that something as ephemeral as a computer game company can command a near- $1 Billion valuation at its IPO (with minimal  earnings to date).

Meanwhile, my chosen one and only stock market trade/investment – ALCOA – which is the world’s largest producer of something the world actually needs (aluminum), maintains its rally trading over $12 (bought from the $8 area).  No matter what happens in the next crash, the world can easily fall out of love with a computer game, but not with a basic raw material like aluminum.

But as a wise man once  said, “You can fool some of the people all of the time and all of the people some of the time, but you cannot fool all of the people all of the time”.  A crash is coming.

All of the sentiment indicators I follow are flashing Maximum Bullishness.  Here is just one:

(chart courtesy elliottwave.com)

This Investors Intelligence survey has been in a 26-year extreme since the start of the year – and the Dow is trading 300 pips under the all-time 31 December high!  What a divergence.

How’s this for complacency?  Here is quote from a seekingalpha article today:  But it just isn’t the time of year for crashes. That may seem like a dubious layer of protection, but take it from one who’s been through a lot of crashes – stock prices just don’t crash in the early spring. (emphasis mine)

OK – so tell the market not to crash just yet – we’re not ready for it.  Unbelievable.

Another sign of trouble ahead is the performance of US Treasuries, which I covered on Tuesday.  Here, yields are falling fast as investors are ignoring the majority who are calling for rising rates soon and are fleeing to the safest investment in the world (so far).

The Russians are first in line here as they are dumping rubles for euros for dollars for Treasuries.  They are running for cover from the sanctions.  And we will see much more of this flight to safety in the coming weeks – and not just from the Russians.

Adding to this pressure on yields is the ongoing deflationary path global economies are facing.  Yesterday, even the inflation-fuelled UK economy reported a drop below the 2% inflation figure for the first time in years.

I believe there is a good chance the 30-yr long T-Bond can reach close to the 1% yield level in a few months.  That is when the stock market crash will be in full swing.

Meanwhile, stocks took a beating yesterday with the small caps and Nasdaq leading the charge.  Could this be the start of the crash?  We have seen many false dawns before, but just like the boy who cried wolf, when it starts, the world will disbelieve it.

Reading current articles and although many are calling for a correction soon, the majority believe stocks will head even higher this year.  Complacency rules!