Bottoming is Hard

When the markets go up and it dips a little, it’s very easy to bottom and charge higher. It’s also very easy to rip higher on good news, a Fed comment or something to do about Chinese growth. However, after suffering the sort of train wreck we just went through, it’s extremely hard to bottom out and head higher.

For one, all of the bears are pressing their luck, betting against the same names. And two, the overhead resistance is absurd, since margin levels were so high prior to the drop. Often times the bottom is found when the last bull, guys like me, give up and cry in the shower, lamenting over the mistakes made.

After the market bottoms, no one will know it. The bears will continue to short stocks, thinking we’ll retest the lows. We might even do that and it will be ugly. There will be an awfully large wall of worry to climb, all to do with valuation and how the economy cannot support such high multiple stocks, yadda, yadda, yaddda. Then we’ll get a few break out days, again leaving the bears in disbelief.

Then the big one will come, effectively alerting the bears to the fact that the market is on its way up again. By this point, all of the scared money will come racing back, hoping to capture some easy gains. Simultaneously, short sellers will provide the tinder for the fires, by covering their shorts. So you’ll get natural buyers and short covering, a recipe for a massive melt up.

But before any of that can happen, we need a foundation.

Naturally, this time might be different and perhaps the market is smart this time around, telling us something about the economy that we don’t already know. I am just laying out the most likely scenario, based upon my time in the market.

Looking at the market now, I am not happy with the action. It’s rocking back and forth between gains and losses, a bad idea when you have technical damage and people who have forced liquidations coming up.

[youtube:https://www.youtube.com/watch?v=5mEHXYW1W6A 603 515]

Back in 1998, my book of business was a smoldering mess, reeling from the 1997 debacle. I had been fired from my previous firm, supplanted from the office I was placed in at my new firm for lack of production, and generally hating life being the sole source of income for my wife and newborn son. In the summer of 1998 the Russian crisis hit, aka “Asian contagion”, and it wreaked havoc on equity markets, sending the Nazzy down a cool 30%+ in a matter of 8 weeks.

Whatever clients I had left were decimated, reduced to rubble, thanks to the ruble. At that point in time, I was looking to switch careers. I never really made any money, so I had nothing to lose and nothing to gain by staying.

After failing to secure “a real job”, I had no choice but to get to work.

Barnes and Noble’s was one of the stocks I was buying, getting smoked daily like a pack of Benson and Hedges. Unlike today, BKS was a hot stock. They were supposed to take on AMZN for online bookstore dominance. They even had a deal with MSFT that led people to believe they’d beat AMZN’s face in.

WRONG.

But the point is, it was a momo stock, lifted more on sentiment than fundamentals. As you can see, when the animal spirits left Wall, the stock lost its floor and crashed 50% in a few months.

Look at today’s momo stocks. Even though the Nazzy is only off 6% from the highs, there are stocks down 30-40% on no news, simply a side effect of cancer infecting the minds of speculators. Clearly, this is overdone. Nothing goes down in a line. Nothing goes up in a line. Nothing lasts forever, except death.

Based on the current numbers, if the Nazzy fell by another 25% (LOL!), FEYE would be down around 80% from the top, sitting at around $15. C’mon son.

Just like 1998, this market isn’t going down on fundies. It’s going down because of fear. When the fear dissipates (look at that chart), we are going to whipsaw around faster than you can shoot your margin clerks in the head.

I built my business in 1998, went from supreme piker to #3 producer at the firm in less than a year. It was a crazy lifestyle change for me, as I was literally sitting at 10% equity at the time we bottomed. Accounts were teetering on zero equity, long internet stocks into the teeth of insanity. Everyone around me was in cash and warned me to stop buying stocks. Stubbornly, I kept calling people, telling them to “buy the blood and drink it like a fucking Vampire in a blood bank.”

When it bottomed, my money line went apeshit to the upside. I even got my office back. Clients sent me their friends, mothers and grandmothers to manage–all setting up for another grande fiasco in 2000. But that’s another story.

https://www.youtube.com/watch?v=twnUE2yLdZA

Coffee is up 75% for the year. The Russian bear fund, betting against a bunch of borscht eating Ivan Dragos, would’ve yielded you +59%, via RUSS, year to date–had you been involved.

NUGT and DRN are both up almost 40%, pointing to strength in gold and also real estate. I thought real estate was dead? I guess people want yield, now that the second coming of the great tech wreck is upon us.

Hell, even EGPT is up 25% for the year.

How low can the momo go? Well, for some choice names, unfortunately, a lot lower.

Going over my work, I see there are 353 stocks down 10%+ over the past month, who have quarterly revenue growth of 20%+. Of those names, those disgusting, filthy, growth stocks, 121 are STILL UP for the year. Ha! Can you believe that?! Clearly, this is unacceptable. This is a down year and if you are growing your business, mind you, your stock deserves to trade lower, so that all of the money can slosh around in real estate stocks, utilities and foreign telephone companies.

Who are the most egregious violators of this cardinal sin?

I will tell you now.

PLUG, BLDP, a bunch of weed stocks, IFON, MGN, TSLA, YY, even CRTO and FB are up for the year!!!

Bastard devils: get back down and go lower. Short those stocks and throw dynamite sticks in the air for celebration, once you’ve broken them to pieces, dismantled their lines of credit, and fired all of their employees for Christmas. Since America is borrowing lots of money, not growing jobs fast enough, and generally NOT on the gold standard, saddled with a black communist president, we ought to dive headlong into the concrete pool of credit destruction.

NOW IS A FINE TIME for the GOP to wrangle over the credit worthiness of the United Steaks of America.

This sort of action can only mean one thing: there are lots of GIMO’s to come this earnings season. I suggest you batten down the hatches and prepare for the second coming of the devil himself, who will then bring forth, and usher in, the anti-christ (a bit redundant, no? considering he’s here and all), who will then deliver the final salvo to this egregiously over populated, debt ridden planet: a nuclear war.

Have a nice and pleasant sleep.

Who are these people on my television telling me that 30-50% declines in leadership stocks is “healthy”? Do these trolls have souls or are they as ghoulish as my mind imagines them to be?

I “lucked out” today, as FEYE and YELP spun higher into the close. With WDAY and SPLK down nicely, I am sure my losses were somewhat muted in the mid 7 figure range.

Bannings have been banned at iBankCoin, for as long as this market continues lower. Have at it–give me your worst. I look forward to doing single combat with each and every one of you, tracking you down in your little trailer parks, breaking your collared bones into dust.

So we have a bit of a mess on our hands; but at least we got ourselves a fine olde fashioned PPT oversold signal tonight. That must make you feel a bit better about yourselves, no?

Here are the recent OS signals, attached to a little neat chart of the SPY. Rip it to sheds. I don’t care.

In about 30 minutes, I am heading to the gym. It’s arm and hammer day and I intend to rip my biceps and triceps from my bones, leaving my arms limp and jelly-like.

As we speak, Fed Chairwoman Janet Yellen is preparing herself a nice little glass of warm milk, getting ready for bedtime, which is at 6pm.

I’ve given up hoping for a bounce and have looked up local soup kitchens, preparing for the future. All of this stock market calamity has made me hungry. How about you?

Oh, I almost forget to mention, The PPT has just flagged OVERSOLD, which is a big deal for me. Unfortunately (also for me), I acted rashly over the past few weeks and ignored its better judgement, and as a result, find myself in a bit of a jam sandwich at the moment– if you know what I mean.

The last oversold signal registered on 2/3/14.

I know many of you caring folks are wondering “what are Fly’s losses? How much money has that stupid bastard lost in recent weeks?” It’s all relative, frankly. Isn’t it? Short sellers are shooting fish in a barrel at this point and anyone stupid enough to be long “the best stocks” almost deserve the losses. I’d like to tell you “don’t worry, this too shall pass.”

However, it won’t.

This is it. THE BIG GIANT STUPID TOP that we’ve all been waiting for. After the market spits me out, I’ll be lucky to do stand up comedy routines in Trenton, NJ, whereby I get shot immediately following my performances. Aside from dealing with money, I’m a fairly decent writer, better than most. I suppose I could segue my wildly unsuccessful finance career into children’s books. I could write a series of books about the stock market, all showing men jumping out from windows following poor decisions in the stock exchange. It will make for a good lesson or two.

“So how bad are the losses, Fly?”

I’ll put it to you this way. I survived the 2008-2009 crash because I went short and was careful enough to never stay long into declines. Every time the market started to drop, I knew it was only the beginning of a serious decline. So I’d take my losses, reverse course, and go short. I’d buy inverse ETFs, puts, whatever it took to survive. This time around, I got caught flat footed, in “the very best stocks”, and the drops are equal to what I absorbed during the dot com crash, when I wasn’t prepared and barely escaped. The only reason why I made it out of the dot com crash was because I was crazy young, energetic, and fucking ignorant as shit.

I don’t have leverage issues here and will not be forced out of stocks. But, rest assured, many people do. And right now those stupid bastards are being liquidated. After the margin clerks sell, THEY SELL SOME MORE. Rumors of a fund going bust, instantly makes that fund’s positions targets for short sellers.

So here we have a situation where the market is dropping into a rabbit hole, everyone is chasing each other’s tails down the drain and there is nothing, as far as I can see, that can stop it.

Welcome to THE GREATEST TECH WRECK OF YOUR LIVES: a Ben less tape.

[youtube:https://www.youtube.com/watch?v=5mEHXYW1W6A 615 503]

Oddly enough, the very thing that I try to avoid (earnings) is what I am hoping might put a bid under this market.

Typically if a stock get crushed prior to earnings, that crushing blow is already “baked” into the numbers. The stock rallies and a vicious short squeeze ensues. In rare times, a stock gets crushed into earnings and the earnings confirm what people feared most: a horrible decline in profits. This leads to a final rout in the shares, something that will leave longs scarred for the rest of their lives.

Give the recent “pullback” in stocks like FEYE, down 47% over the past month on no news, one might surmise this company is on the verge of a catastrophic earnings miss. Should they beat estimates, one might also surmise that the stock is going to get a “full erection” post earnings and commence to offer “surprise sex” to all of those who are short.

What if they miss?

With the stock halved from its highs, it’s entirely possible that the stock might rally under any circumstances. It all depends on the mood, quite frankly. Will risk appetite come back? Will America’s $55 trillion in personal net worth be put to work or will funds suffer redemptions?

During many market panics, share prices got compressed to ridiculous levels, most of which resulted in tremendous buying opportunities. The key, as always, is to stay in the game.

Having said that, let’s take a look at the earnings calendar and see if we can glean into their upcoming reports and determine whether or not earnings shortfalls are “baked in.”

CRTO: major player in online advertising, second to Google’s Adsense, is the first of the recently destroyed stocks to report on 4/14. I believe the fate of the high growth stocks is going to be greatly affected by how the stock responds post earnings.

After CRTO, here are some other stocks to watch, one’s that are scheduled to report early in the reporting season (listed in chronological order).

ATHN

AMZN

ANGI

AWAY

LL

N

NFLX

TWTR

WETF

WYNN

BIDU

CREE

The billion dollar question is this: If CRTO misses estimates, will the stock get crushed again, or is it down enough to warrant dip buyers to step in? My guess is it has all to do with guidance and if the guidance isn’t apocalyptic, these stocks will be bought, regardless of what the numbers say.

Something doesn’t feel right about losing all of this money. I can’t put my finger on it. Rumors of hedge fund blow ups. The media is crapping on “momentum stocks” when in fact they are growth stocks. I was told a long time ago to buy when there is blood in the streets. When everyone is running one way, go the other. This has to cessate and we must bounce. Even in the worst of markets, you get a bounce. I have one more slither of cash left reserved for averaging down and I have no choice but to save it for Monday.

I’d like to buy now. Then again, why should I since everything might crumble to pieces on Monday?

In all of the years that I’ve been in this business, I’ve NEVER seen the IPO whorehouses, assisted by the vulture capitalist houses, be so blatant in their disregard for the investor. To hell with GRUBHUB and all of these S-1s that are being filed. How the hell can you justify bringing a tech company public in the midst of an epic rout in tech stocks? It’s borderline criminal, at a minimum morally corrupt.

Have a look at how many IPOs are on deck to be priced. It’s amazing.

Anyway, keeping with the standards of iBC, all tabbed bloggers will be catering to you this weekend, with ChessnWine doing a special video overview Saturday or Sunday. Additionally, I might allow for free passage to all premium services, After Hours with Option Addict, The PPT and 12631, on Monday and Tuesday. We will get through this, one way or another. We always do.

Right now I am trying to put together a list of hedge funds who are getting smoked. I might post something about that this weekend.

Since everyone is talking about it, comparing this environment to that of 2000, I though it’d be useful to actually see how the dot com bubble progressed in a stock that embodied the good and the bad of that era, a relic from the past: SCMR.

The market topped in March of 2000 (eery) and the losses mounted good and fast.

Here is the price action from March on.

March 6th, 2000: $170 (looks sweet, new highs)
March 27th: $120 (buy the dip?)
April 3rd: $78.5 (got to buy it now, yes?)
April 10th: $48.94 (this is just ridiculous)
April 17th: $64.56 (that’s better)
April 24th: $78.50 (the bull is back)
May 1st: $86 (kill the bears)
May 30th: $90 (get some)
June 17th: $138 (c’mon, son)
August 14th: $167.19 (buying a new house and lambo, cuz I bought the dip)
August 30th: $142 (no biggie. A little profit taking)
Sept 11: $105 (was that a double top?)
Sept 18th: $117 (here we go again. Back to new highs?)
Sept 25th: $105 (maybe not)
Oct 2nd: $78 (that was a double top)
Oct 16th: $85 (we’re bouncing here)
Nov 6th: $59 (maybe we’ll retest the lows then bounce. Crazy tape)
Dec 4th: $64 (holding steady. I like the consolidation)
Dec 18th: $35 (taking out new lows, the bottom dropped out)
Jan 2nd, 2001: $33 (new year, fresh start)
Jan 16th: $50 (atta boy)
Jan 29th: $29 (more of the same. This market sucks)
Feb 20th: $20 (where is this thing going, zero?)
March 5th: $14 (wow, what a value!)
March 26th: $10 (I can’t believe this stock was $170 last year)
April 2nd: $7 (ruinous. That was the bubble)

If you go through each price point, you can see how it’s easy to get caught up in a bubble and not even know it’s happening. Hope mixed with the surreal, combined with greed, makes for a dangerous combo.