Nasdaq Futures Crushed — Prepare to Be Annihilated

I had two pounds of ground beef lying around, so I whipped up some white trash Salisbury steak. When I was a wee lad, I always liked the Salisbury steak teehee dinners. I’d eat the steak and the brownie, toss away the fucking corn niblets and then complain to my mother about being hungry again. My version of this white trash classic is a little more developed, festooned with extraordinary ingredients, burgundy wine, and a homemade beef stock. Alas, Le Fly is a man of distinguished qualities, food, drink, tobacco, stocks — all the very best.

As for markets, prepare to be fleeced. Nasdaq futures are down by 50. My quant portfolio has been manhandled this month, in line with the broader market — but my active portfolio has gone higher — due to timely trades and also aggressive defensive posturing. Heading into tomorrow’s bloodbath, Le Fly is 65% cash. Find solace in knowing that Le Fly, a man of distinguishable qualities and super genetic material, will be fine at the opening bell. While you might be cast asunder, crushed under the weight of your own incorrible hubris, I shall be fine.

There’s no news or narrative for me to weave, other than the obvious fact that there are more sellers than buyers. The fashion on Wall Street is now to sell, get scared, sell some more. If you over analyze these sort of things, you’ll trade yourself into the poorhouse. Stay defensive and don’t try to catch the bottom. Too hard and low probability for novices, such as yourselves.

Digging into Exodus, I found the recent heart shattering drop, which by the way is being handled with excellent decorum, to be a very rare event, as far as recent history is concerned. Month to date, we’re down 7.5%. Since 1999, the only Octobers with similar declines were in 2000, 2008, and 2012.

Back in October of 2000, the market had already cracked asunder — and the world as we knew it crashed to pieces. I even wrote a book about it. In other words, the October crash came as no surprise in 2000 and markets were already in a grim mood.

Fast forward to 2008, a recent history that most of you could make allowances for, and the financial crisis was in full swing. I mean, the shit was in the fan and spewing everywhere. Worldwide, markets had already melted down. The pleasant experiences of the past 200 years of democracy was in the balance and capitalism, as we knew it, had failed. The banks had been bailed out and the people were readying themselves, outside the city gates, armed with pitched forks and eyes blazing with fury.

And then there was 2012, a year often glazed over as unimportant — but was supremely pivotal in keeping the EU together with Greek bank bailouts. The good news is, once markets bottomed in 2012 — they never looked back — charging forward and soaring in 2013, higher by 36%.

This is year 10 of the bull market, defined by net positive returns in the QQQs. We were up more than 30% last year and have YTD returns in the magnitude of 11%. The recent 7.5% slide in the market has been fast, but taken with a grain of salt — since most people are accustomed to brief interludes of loss followed up by long durations of gains.

Traders aren’t prepared for an extended pullback. We haven’t had one since 2008; and the only markets scares we had since then were mostly superficial and solved by Federal Reserve reassurances.

Is this time different?

Perhaps. Let’s keep an open mind to the fact that we’ve never been in a trade war with China, and certainly not during a time when the Fed was hiking rates as fast as they could. In other words, there are tangible risks to the economy, and the Fed, as always, is ignoring them and tightening credit — which further exacerbates the situation.

My hope is for a 2012 scenario and all will go back to normal soon. After all, the China trade issue could be solved with a conversation on the phone, a crisis to be averted just like the European bailout drama.

This made my day.

The CEO of CLF, Lourenco Goncalves, went on an absolute rant this morning — saying shorts were gonna get hurt so bad by his share re-purchase program, they’d have to commit suicide to escape the pangs of despair.

“It’s unbelievable that this big banks has still employ this type of people, you should resign for your lack of knowledge of things, it’s not like that you don’t understand, you are very one of the best, it’s not like you don’t understand our business , you don’t understand your own business. You are a disaster. You are an embarrassment to your parents. With this being said, we are going to use money to reward the long-term shareholders. So, if the stock continues to go down based on these kids that play with computers and somebody else’s money, we are going to buy back stock. We are going to screw this guy so badly that I don’t believe that they will be able to only resign. They will have to commit suicide.”

Then he went after Mathew Korn from Goldman Sachs, who happens to have a hold on CLF — threatening him in all sorts of manners.

“Lisa, before you call the next question, are there a guy named Matthew Korn waiting in line to ask a question. He is – he calls himself an analyst and he works for Goldman Sachs.

Aww. Matthew Korn if you are on the call, [indisc] … why you don’t ask a freaking question? I will be happy to answer. Okay. Who is next Lisa?

…

With that, we are done and Matthew Korn from Goldman Sachs, you can run, but you can’t hide. I will see you at the Goldman Sachs Conference, very soon and bring your commodity desk guy because you owe me that for the last year. It will be easier for you if you have the commodity desk guy with you interviewing me. If you are alone, it will be a lot worse, it will be bad no matter what, but it will be a lot worse if you’re alone. Bring the commodity desk guys or girls with you because I promised you last year that I will take care of him, her next time and next time is coming. [indisc] I’ll see you guys soon. Thanks for joining me this call today, bye now.”

Boss, but the stock is probably a short.

Fuck this shit. I top ticked both TLRY and CGC — probably due to previous success in the space. I was confident that I could win and bought both stocks whilst up, and now with the market barreled lower and I got caught holding the bag.

I opened up said bag, hoping to find treasure. Instead I found a FLAMING BAG OF SHIT and it nearly took off my nose.

Out of both TLRY and CGC, 7% losses on 10% of my portfolio. Cash position is 65%, awaiting a retest of the lows for the Nasdaq, 100 points lower.

This is plaguing the market recently, the incessant underperformance of small cap stocks — the lifeblood of the seemingly idiot investor. Truth be told, I’ve been known to partake, but only to a small degree and only when bored.

Stocks with market caps under $5b are lower by 0.6%, while stocks with more than flat.

I think it’s fair to presume we’re more likely to retest the lows on the Nasdaq next week. We have just 150 points to the downside left, so it’s not really a big deal. The larger issue we should be concerned with is the technical damage done to key stocks.

Hubspot is perfect example of what we’re facing now.

And here are some market breakdowns of the past, perhaps a blueprint of how we might bottom. Watch the patterns.

And this is now. Clearly there’s more vacillating to do.

No one else is covering this, so I might as well.

There is nothing moving faster than these micro cap Chinese stocks now. The reasons for the explosion is nondescript, seemingly out of nowhere, and without cause. If I was forced to guess, I’d say this is some sort of scheme chalked up in Beijing in an effort to inflate prices of beaten down ADRs.

Here are some Chinese lotto winners.

PLAG +275%
NCTY +150%
CBAK +26%
SGOC +23%
FTFT +19%
CNET +17%
TKAT +17%
CPHI +16%
ATV +14%
AMCN +14%

And about a dozen more up more than 5%.

If you’re playing these, remember these stocks are illiquid and likely scams. What you’re seeing now isn’t material, only fashionable.

I bought back CGC and TLRY this morning. Both stocks are elevated, but look like they want to head higher. I’ve successfully traded these stocks numerous times and have never lost money in them. It’s pretty hard to lose money in a new sector that offers so much promise and extreme degrees of degeneracy.

By my vantage point, both TLRY and CGC are the best publicly traded pot plays, with NBEV being a speculative third.

Markets are of course strong and I’m stuck with SQQQ. I’ll hang onto it a little while longer, waiting for the afternoon session to determine whether I’ll cut it loose now or next week.

Good morning lads

I see markets are swimming higher, against the current, fishing out unsuspecting rubes to buy it here. Need I remind you the weekend is just around the bend and Monday might be an awfully terrible day. All sorts of insane things might happen. There’s no telling what Trump might say over the weekend.

Needless to say, markets don’t bottom on Friday, even if PG is higher by 6%.

Right now, like a true degenerate, I’m sitting here, sipping a scalding cup of black coffee, rooting for CPHI to jimmy higher. It’s making me nervous, because of its 30% swings. Alas life as a Chinese burrito.

Let me get settled in and have a better look at the market. I have a ton of cash, so if something looks ready to pop off — I’ll have no issues buying immediately, regardless of whether markets bottom on Friday’s or not.

Quants, robo-advisors, HFT, and algorithmic based trading desks dominate Wall Street now. It’s has gotten so egregious, I literally base my investment decisions on how a quant would respond to sell off, the criteria it’d be interested in, and how negligent the programmers of said quant might be. Gone are the days when retail meant something to Wall Street. Trades are now done, based off AI, machine learning, and quantitative analysis. Certain triggered get hit, and a cascade of orders follow.

Goldman’s DJ Sol is out with a ‘duh’ moment, suggesting robots are to blame for the recent slide.

Source: CNBC

“There’s no question when you look at last week, some of the selling is the result of programmatic selling because as volatility goes up, some of these algorithms force people to sell,” Solomon told CNBC’s Wilfred Frost. “Market structure can, at times, contribute to volatility and one of the things that we’re spending a bunch of time thinking about at the firm is how changes in market structure over the course of the last 10 years will affect market activity.”

He continued.

“All those things are untested over any duration of time with severe stress,” Solomon said. “Now, when we see a little bit of stress, you can see reactions that might lead you to believe that there’s a risk that with more significant stress that could play a bigger role. I wouldn’t predict that, but it’s certainly something we watch.”

According to JP Morgan, as of last year, discretionary traders accounted for just 10% of trades.

Looking even deeper into quant trading, the high frequency varietal accounts for ~52% of all trades. That is literally the dumbest form of trader — the algorithm that rips trades to and fro in fractions of a second — with the goal of milking each trade for a small profit. Reminiscent of the scheme purported in the cult classic flick Office Space, those pennies quickly add up, and produce billions in profits to Wall Street’s top trading desk.

How profitable are these strategies?

Back during the hey day of HFT, 4 investment banks posted a record 61 straight days without a loss.

Even more perverse, and just to show you how the deck is stacked against the plebeian retail investor, JP Morgan lost money two days over 4 years.

I bought ABX today because gold is receiving institutional interest again. Now with China and cryptos destroyed, defensive nut cases have no choice but to barrel in sideways into gold. Over the past month, gold stocks have outperformed SPY by +15%.

I also bought some SQQQ, just in case we retest the lows — which is 200 Nasdaqs lower. There’s a lot of ‘just in cases’ in my moves, much to do with being restless, impatient, and impetuous. I am being petty — because my trading account is designated for trading. If it were a long term account, I’d snooze and watch teevee. But because I’m supposed to trade it — that’s exactly what I’m doing.

At the close, I was 60% cash, 5% SQQQ, and a fist filled with pleasantness.