MARKETS ROUTED — TRUMP LIES, MARKET CRIES

Let’s lay our cards on the table and do a proper workflow of what this market is predicated on.

Great economic growth, tech, innovation, lower taxes, free cash flow, momentum.

All of the above is at risk, all of a sudden. The auto-catalyst of the negative feedback loop is real. Trump’s lies about working on a China deal in flaccid attempts to buoy stocks have hurt sentiment more than people realize. Those short term rallies have all been negated and now we’re in a position where retail sales, of all things, can further push us down the train tracks in front of speeding trains.

The SAAS sector is most important when analyzing risk and growth. Those stocks were staggered by 10% today. HUBS is your main tell.

In private markets, VC funds regularly fund companies at 30x. That’s an issue now.

Semis are part and parcel of any tech rally. NVDA is your tell.

The FAANG stocks are in a bear market.

Those are facts. If you’re betting on a bounce of that this sell off is temporary, you’re simply guessing. We will reassess the market and try to play the upside when stocks trade up. Playing mean reversion during a brutal tape like this is extremely hard and low probability.

My core thesis for the moment is for lower rates. Hence, I am 10% long TMF and the rest cash. I’d love to play the upside, but nothing in this immediate tape has proven to be constructive. You might disagree. If you’re unable to see in more than 1 dimension and only possess the cognitive ability to act upon first order thinking, this post will be frowned upon. But for those open minded and able to implement lattice structured decisions, BEHOLD THE FOLLOWING CHART.

SAAS stocks are down 9% today. That’s not a misprint. NINE FUCKING PERCENT.

The pivotal name in this group is HUBS — down nearly $20 for the session.

Over in the leadership stocks, FAANG, $FB is lower by 40% from the highs. The entire groups is heading into bear market turn over the past 3 months.

How do we dig out from here?

As I’ve discussed before, bulls have two magic bullets — but Trump needs to deliver.

1. A China trade deal will cause a furious rally.
2. Fed pause in response to market conditions will make Powell Goldman’s bitch. This is a good thing for markets.

Other than that, the trend is lower. The data is good, but deprecating. Watch leadership stocks and sectors for a tell. I’m betting on a Fed pause, which should help start a furious rally in bonds.

US treasuries are attractive here, especially for safe haven status. This could be a point of true breakout or perhaps the top of the channel. Give then low volatility of bonds, I don’t think this is a very risk trade.

Much of my “bearishness” is admittedly emotional — but the data is definitely driving my bias. I am still 100% long in the quant and that is 75% of my money. I only have GLD/TLT in a 10% weighting, as a sort of hedge. If markets ran higher by a thousand tomorrow, I’d be a big winner there and possibly a nothing burger in my trading account.

For my tactical account, I am 85% cash, 10% long TMF and that’s all. I’d prefer to buy into a healthier tape.

Two things to watch that are not being discussed in the FUCKING MEDIA.

A vicious move to the upside in both Swiss Francs and Japanese Yen. The Yen carry-trade comes to mind and the ultimate safe haven of SwissFAGS is very relevant. Those who’ve played bear markets before know those two currencies draw in buyers during periods of duress.

I know that I sold SOXS and I just sold NUGT for a 9% gain. I am 90% cash and not trying to play the downside because of my losses endured today. I lost 4%, even with TMF, NUGT, and SOXS and lost the right to speculate in this high octane market.

Here’s the important aspect of today’s market.

The retest the lowFAGS have won again. We’re retesting and it doesn’t bode well. FAANG is hitting new 52 week lows. For the session, negative breadth is 85%, only succored by strength in old man stocks like Tootsie Roll, Utes, and gold.

We’re at the lows and it looks like another damned head and shoulders. At a minimum, channelFAGS will argue today supports the idea that we’re heading back down again and the Nasdaq should crater soon and very strongly.

LISTEN TO ME: If you’re down big and long, you have to sell here and raise cash. Period, end of story. If you’ve been in cash, this is a good place to gamble on the long side — hoping for a seasonal bounce. Please understand, the circumstances of those two totally different positions are important. Loss management is the most important aspect of money management. Any monkey can make money in a bull market. Preserving capital in order to trade in a better tape, one without wanton rape, is the goal.

Even with my SOXS position, my portfolio took a ~4% drawdown today. Most of my holdings were at or near my stops, so I had no choice but to sell.

The obvious questions now arise.

Are you afraid of missing the rally?

No, because I don’t deserve to enjoy a rally. I bought too early; therefore, I am out.

Why not hold and hope for higher prices?

I am past the point of hoping. My losses, although terrible at 4%, could double if markets really knife lower. The risk reward isn’t there for me right now.

Will you short or buy more gold or bonds?

No. Gold and bonds are barely up and not showing bullish signs. It’s still up, but not enough to warrant more purchases. Too late to short, especially into Thanksgiving.

Plus, let’s not forget, 75% of my money is in a quant fund, which is down — but not nearly as bad as high beta tech. I will reassess the quant fund at the end of November.

Bottom line: Cash is a position and this set up is equal to gambling. I lost the initiative by being so long into this meltdown and have lost the privilege of being able to take a high risk position.

Give me your fucking stocks, I’m throwing them away. Unfortunately, I was out this morning and could not opine on this lovely market. I had a few hedges, one in SOXS because of white candles that never fail. I just sold it for a 5% gain.

Aside from NUGT and TMF — everything is directly in the shitter.

It just so happens, I was 95% long heading into today. I know that sounds wild and crazy, but I had some hedges and I really didn’t think the market would crash. I WAS WRONG. So now my options are simple: sell everything and wait, or wait and risk burning in the fires.

Tech is getting hit the hardest, down more than 5% today.

FAANG itself is lower by more than 4%.

Since I just was able to sit down and asses the situation, I’m gonna have a nice look at things for 30mins over some coffee, chill the fuck out, and then react.

See you in about an hour, or much sooner in Exodus.

I am so god damned busy today I can’t even see straight. Years ago I was so lazy and spent my days in complete leisure, spare time to watch cinema, afternoon faggot sessions of reading books, cavorting online with animals in a fleeting effort to make them better investors. Now that I’m older, grizzled, and wholly odious — bald head, weather beaten face — I am so busy I sometimes prefer to be dead. Don’t worry, I’d never commit suicide — because that’s a waste of a perfectly good death. If I ever wanted to die, I’d do so in a comedic manner, such as hostilely takeover a Chicago drug corner in the manner of an investment banker — producing documents to said kingpins of my intent and the new leasing conditions set forth for their continued pharmaceutical enterprise. Or maybe I’ll venture off to Syria and walk around with an Israeli flag, planting it into the center of holy muslim sites, or vice versa.

There are lots of hysterically heroic ways to die. Maybe I might decide to be a vigilante. Who knows?

At any rate, I realize I am fighting an uphill battle here. With a decade long bull market, many of you have developed bad habits. You’re permanently bullish and therefore stupid. You attribute blind luck to skill and lack discipline and focus. This is where The Capstone Programme comes into play. I will call you up on the god damned phone, or via web based communication service, and force strong and good habits into your investment lives.

The service should be launching by Black Friday and it will be on a first come, first serve basis. Since each session is a personalized mentoring, educational experience, I can only accept so many members per month, maybe 100. If you show up late and lament over missing the opportunity to buy 1 hour’s worth of my time, do not fear — for you’ll be placed on a waiting list and I’ll get around to you. At the moment, Jeff Macke, Ragin Cajun, and RAUL will also be available to help, with Macke specializing in retail (his father invented the modern day Target), Ragin for technicals, and RAUL for futures.

The purpose of the service is as aspirational as it is ambitious: transfer our knowledge and expertise to you in order to hasten your journey into becoming a better investor/trader.

Courtesy of Exodus, here is my current Quant fund — +1.5% over the past two weeks, versus a SPY which is flat. I win again.

You need this talk — because greed causes people to do funny things. At the end of this blog is a mea culpa of the owner of OptionSellers, who just got blown the fuck out and turned into dust. I’m indifferent about his experience because he’s old and should’ve known better. Blow ups are for younger men, creatures of finance with chemical imbalances and small dick syndrome. If you’ve been doing this long enough, minimum of 10 years, you know blow ups happen all the time, even to the so called ‘smartest fuckers in the room.’

Once upon a time, 18 years ago, I had a blow up. Back then I was untrained and in my early 20s and literally didn’t know what the fuck to do once the party ended.

Let’s make a few things clear now.

The recent trends are lower. Ergo, your short term bias should be for lower prices. Given the fact stocks, over time, almost always go higher, you should temper any bearish positions and implement some 2nd and 3rd order thinking.

What the fuck do I speak of?

Stress test your portfolio. Dissect it and build worst case scenario models.

What are your position sizes? Greater than 10-15%? You’re an idiot. Is your entire account being traded? You’re an idiot. Is your long term account being tended to, reassessed to conform with the times? If not, you’re an idiot. Are you diversified? How do you know and what is your benchmark? Is your trading account using margin? Are you using stops losses to contain losses? Are you trading just for the sake of trading?

The present tape is really hard. It’s a non-stop ball game with Nolan Ryan on the mound, spitting out 105mph peas. Why not wait for a new pitcher?

Eventually, the market trends will improve and easy money could be made again. Chill the fuck out and quit churning yourselves into oblivion.

Look at this asshole below now, crying and shit because he sold naked calls against natural gas and got himself and his ‘family’ members eradicated from the field. When you get a six sigma event — your models mean nothing. If you have a strategy that has outlier risk and could blow up during a black swan event, simply avoid said schemes and focus your efforts on compounding returns over the next 30 years.

Iatrogenics comes to mind when viewing today’s tape. Last night, in a hurried panic, I sold SOXL in the after-hours, alongside NVDA — thinking both would trade lower. I ended up correct about NVDA — but SOXL made up much of its losses and rallied hard into the close. When referring to iatrogenics, it is the process of doing something just for the sake of doing it — thinking it’d be beneficial — when in fact it hurts you, or the patient.

Sometimes the best thing to do is nothing. But please observe my overall position so you can make a better assessment. I am repeatedly telling you this — because my hyperbole often gets in the way of my overall investment philosophy.

My trading account is 25% of my overall investable money. The balance is in my quant fund, which was up 32bps today and +1.26% for the week.

So my SOXL mishap was 5% of an account that was 25% of my total. These details make the difference between a winning strategy and a losing.

In the close, I had 15% cash in my trading account, with one hedge: SOXS. My other defensive positions, TMF and NUGT, seem to be doing well even with equity reflation. All in all, I consider my position to be good and I should make money if the market rallies next week.

If we head lower, which, admittedly, is my hunch, I’ll quickly sell some longs and add to my shorts.

Have a great weekend.