iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
20,803 Blog Posts

Fundamentals and Technicals Are No Longer Relevant

In spiraling markets like this, there is always the desire to bottom pick, myself included. Without a doubt, there are absurd values out there, that will eventually end up being big money makers for those who had the stones to step up and buy. However, until stocks stop trading lower, they will be subject to forced selling. Forced selling will be done by hedge fund managers liquidating their fund due to end of year redemptions or closure of funds. And, it will be done by retail investors who are heavily leveraged via margin call selling.

This sell off is about two weeks old now, with the S&P down 6 straight days. With the high levels of margin debt out there, without a doubt, this means people will be liquidated as the market falls.

The most vulnerable stocks are ones favored by hedge funds with thin floats. And, stocks that trade less than 500k shares per day are especially prone to melt-downs during margin liquidations. More often than not, brokers ignore calls and the clerks hit bids at 3:00, at the market, not giving a fuck about executions.

If you are buying a stock because you feel the valuations are too attractive to ignore, keep in mind the shares– like Puma Punku– are trading without logic. LOGIC DOES NOT EXIST DURING MARGIN LIQUIDATIONS.

On the other hand, if you start to see stocks trading up in a down tape, after getting flushed, those stocks might be signaling bottoming out action. My favorite dip buys are stocks down more than 20% over the past two weeks, % of float sold short more than 15%, with solid fundies. The shorts will serve as a bid in a bidless tape. Often times owning stocks without big short positions can be more dangerous than heavily shorted stocks in liquidation tapes– due to lack of natural buyers. At least in heavily shorted names, profitable short sellers will close out trades, providing bids.

TLT is trading up. US treasuries are the main beneficiary of this shit fest. This is a fucking unmitigated horseshit of a mess. Stay away.

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59 comments

  1. Phil

    Love that post…EDZ!!

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  2. CAP

    We are close to a HUGE rally. Could start today could be Friday maybe Monday. But its going to be BIG. Should see SPX 1225 in short order. Getting long PMs here. AGQ DGP GDXJ NUGT SIL. Will dip into TNA when I sense the start of the rally. And TLT doesn’t look likely to surpass October highs IMO. Not a nice looking chart. Once it breaks it will go down hard.

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  3. kidstock

    It’s a weak attempt by the bears to break 1170 on the day before a holiday…

    Go make yourself a bowl of oatmeal –

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  4. drummerboy

    shit hasnt been relevant for a while.like when you think everybody might run to precious, the damn dollar puts the kibosh on it,when youd think that smart money knows the dollar aint really shit, and go to pm’s instead.before this done, minimum wage will be 5 bucks

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    • Yabollox

      Minimum wage will never be $5. That’s part of the problem. We gotta catch up to an $8 minimum wage, and why go off unemployment for even that?

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  5. moolahheaven

    “This is a fucking unmitigated horseshit of a mess. Stay away.” In the words of J-Z, ‘what more can I say?’ I am mostly bonds n cash, waiting to pounce. I recently bought Taseko Mines Ltd Sr Nt 7.75% 4/2019 which has more cash on it’s sheets than bond debt and am prepared to hold until maturity if necessary while collecting big interest. This is a ‘stay away’ mkt if ever there was one, I’m not buying any equities, even intermed term here…

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  6. jose mann

    The marchin’ band came down along Main Street
    The soldier-blues fell in behind
    I looked across and there I saw Billy
    Waiting to go and join the line
    And with her head upon his shoulder
    His young and lovely fiancee
    From where I stood, I saw she was cryin’
    And through her tears I heard her say

    “Billy, don’t be a hero, don’t be a fool with your life”
    “Billy, don’t be a hero, come back and make me your wife”
    And as he started to go she said “Billy, keep your head lo-o-ow”
    “Billy, don’t be a hero, come back to me”

    The soldier-blues were trapped on a hillside
    The battle raging all around
    The sergeant cried “We’ve got to hang on, boys”
    “We got to hold this piece a’ground”
    “I need a volunteer to ride up”
    “And bring us back some extra men”
    And Billy’s hand was up in a moment
    Forgettin’ all the words she said

    She said
    “Billy, don’t be a hero, don’t be a fool with your life”
    “Billy, don’t be a hero, come back and make me your wife”
    And as he started to go she said “Billy, keep your head lo-o-ow”
    “Billy, don’t be a hero, come back to me”

    I heard his fiancee got a letter
    That told how Billy died that day
    The letter said that he was a hero
    She should be proud he died that way
    I heard she threw that letter away

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  7. theedge111

    Fly

    The fundamentals still work. The fundamentals are that the system is a leveraged fraud backed by nothing promises by governments that never had the $$ to back them up.

    It’s being exposed for what it is: A giant fucking Ponzi scheme.

    The sooner the debt bubble is allowed to be popped the better. None of this was sustainable and the sooner we “reset” or “restrcuture”(whatever you wanna call it) the better.

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  8. Mad_scientist

    What is an “income / nonrisk asset” ?

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  9. Keith

    Fly: You still seeing silver as a strong play here? Not personally happy about SLV action today.

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    • jimmy_two_times

      SLW seems to be catching a bid .. sold some for a loss and no shortgae of takers.

      may have to look at another play

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  10. panamaorange

    Even at the lows in the last 24 hours, we have never invalidated this bullish descending wedge in the SPY daily chart. And , there are still bullish descending wedges in almost EVERY other daily chart of ETFs and major stocks.

    As impossible as it looks here, that means we bounce to AT LEAST SPY 125 in the next week or so.

    That bullish “Big W” pattern I posted looked impossible at the end of September. But, it plotted out a 1300 point Dow squeeze.

    Technicals still work in this market, on daily charts. The trick is, trying to figure out exactly when the patterns will detonate. You can usually narrow it down to a 2 week period. But the exact day or minute is usually a surprise.

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    • inandout

      You again with the big W lol.
      Didn’t that theory fail back when we broke 1100?
      Or are you just looking for a really big W now?

      1160 in the minis is my pivot here long above stop below if it breaks then short below stop above scaling in and out till it makes a significant move away from that figure to the next.

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      • inandout

        When I go to sleep out all for a happy thanksgiving.

        I hope that really big W does play out for you in the long run. The old one unless I misunderstood (if so I apologize) how big you meant did not work and even if it did would have been too sloppy(at least on a daily chart) to even be called a W .

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  11. cronkite

    The world of equities is doomed unless Europe starts printing immediately.

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  12. Fly's 16 Percent Gains
    Fly's 16 Percent Gains

    I will check you guys next year…. I am going into hiding the rest of the year.

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  13. Yabollox

    You are right. It’s a fucked up mother fucker. Some selective moves can make it work out in time.

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  14. whoa

    How can you check %float? …

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  15. fxtradex6

    Everybody thought it would be the debt laden Euro nations to bring it down. Reality is Germany will be so stubborn that THEY will bring the entire thing crashing down.

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  16. Taco

    Same thing every time the market corrects. The sky is falling… that anyone trusts ANYTHING the financial news media reports is beyond me.

    I know methheads who are more trustworthy than the financial news media.

    Stay away from the financial news. Stay in the market.

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    • Dr Funk

      I think it’s the other way around. Every time the market ‘decides’ to move up, get your list out, time to jump in, recession is off the table

      EFSF was supposed to be the final fix. Gee, guess not. Just like Bernanke’s fed, EZ’s geniuses are out of bullets

      And the media, the hype over 2.5 gdp. Wait for the revisions a-holes. Or at least mention that in your updates. Q3 gdp final, will be under 2

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  17. TraderCaddy

    Got stopped out of SMH,NVLS daytrades.
    Loaded up with INTC though, and added PAAS and some GS for what looks like a rally to sell into.

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  18. Trading_Nymph

    The one thing that keeps my perfect sell off from happening is Clams coming in and trying to fix it…even a mere lame rumor and all the bulls jump on it. I am patient. The Fundies of the global is junk..all a massive bubble on Global Govt money. I shall be eating the Turkey Gods tomomorrow..they are vegan aren’t they?

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  19. surplusdroids

    Awesome post – Great information from an experienced SAM as yourself. (no homo).

    I love the mechanics of trading.

    The banks scare the shit out of me.
    (For a zillion reasons.)

    Although that didn’t stop my “degenerate ass” from nibbling on some JPM. Falling knife or at support. Nobody knows. But I like my odds with the Godfather Morgan.

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  20. super

    Woowoo all aboard the GRPN train??

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  21. Anton

    Great post/advice.

    Thanks.

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  22. Random

    I thought there would be an announcement by now about an impending solution by one of the news agencies.

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  23. Dr Funk

    Best october since 74? Look at november 74. Right back down.

    Was saving this one… boo ya. bulls

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  24. ?

    More stocks falling into the “Buy Zone” for investors with a long term view. Not committing to big positions yet but a few limit orders are in.

    Looking at stocks near ten year lows in P/S, P/B, P/E, with solid balance sheets and solid dividends.

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  25. Vegas Trader II

    Iran, Russia, we are FUCKED..Russia Plans Capability to Strike U.S. Shield, Medvedev Says

    Nov. 23 (Bloomberg) — Russian President Dmitry Medvedev ordered the military to prepare the capability to “destroy” the command structure of the planned U.S. missile-defense system in Europe.

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    • Blind Read Ant

      Maybe we can hand the HOBOama family as POW’s in exchange for more time to consider our strategies?

      I doubt any other country would want that trade tho.

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  26. Quint

    The Germans are setting the market and shorts up for their big announcement. They’ll time it for a very thin trading environment, like Friday morning. This way they can regain their dominance over the Euro countries.

    It will be a Blitzkrieg pinscher move, using the media instead of Tiger tanks…at least in the 40s you heard the sound of the Stukas.

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    • jimmy_two_times

      you think they will turn the presses on and get EZ to fall into step for a fiscal union by Friday?

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      • Quint

        No, but they’ll leak it to the press…that’s the way these games are played.

        Just watch for Merkel buying the DAX call options…if it’s legal here, I’m sure it’s legal there.

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    • Brendan maye

      I think you are right Quint. I am longer than I have ever been I will either make a ton or be broke Friday.

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  27. Juice

    The best tops & bottoms are formed when fundies & technicals are no longer relevant ….. picking that top or bottom without getting decapped is another matter

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  28. CAP

    punting some of my remaining FAZ and SPY puts here.

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    • Frog Playing a Colorful Accordion
      Frog Playing a Colorful Accordion

      Cap Fly was surprised to see you. Are you a person who disappeared for a while and then returned?

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  29. bunny

    I lost at least $800 today.

    Yesterday right before leaving Las Vegas, I thought to myself, “This shit is getting to risky. I should take my profits and run.”

    I also thought, “I’ll do it by the end of the day.”

    On the road I asked my boyfriend to loggin via the cell app and sell my shares. *facepalm* I wake up at 2pm PST today and the shares are still there.

    Epic mess indeed. All of the money I’ve made last week has gone down the shitter.

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  30. sickman fraud

    A great motivator when you are down is to refuse having sex/drinking caffine/playing poker/doing coke/whatever the fuck you are addicted to until you end up positive! THen you fucking do all the above activities simultaneously as a “reward” until the bitches get a chronic case of penis envy.

    your subconscious needs and subconscious behavior speaks louder than anything you tell yourself… unless you’re stuck in a sexual developmental stage of not getting enough/too much tit when you were a baby and therefore being forever Oedipissed.

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