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Dr. Fly

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.

END OF YEAR RALLY UNDERWAY: MY ANALYSIS

Before I get into what I think will happen into the end of year, I want to discuss November.

The month was a dud, only +1.4% for the SPY, Dow up a little more, but IWM was down up until the Powell speech today that caused an absolute explosion of prices higher, with stocks exploding for +4%. This pushed the gain for all stocks up to around 3.4% for the month. If you did better than that, congrats.

The whole push higher was and is predicated on the repeated notion of a “Fed pivot”, which is partially obvious and partially dangerous since we know the Fed cannot keep hiking in fear of destroying the economy and also we know that every single rally higher has been matched with a spike in commodities.

Here is my evidence.

People tend to only look at gas and oil but the commodity markets are much bigger than that and the prices of everything going UP does not bode well for inflation. On a whole, the raw commodity basket inside Stocklabs was up 6% for November.

The market was mainly buoyed by a weakened dollar (down 4% for Nov), lower rates, and assumption of a soft landing. If all true, we have good reason to rally. After all, the unemployment data has been ok and spending seems fairly robust. If I didn’t know better, I’d say the hike in rates was having a little to no effect on business — which doesn’t seem logical at all. Then again, the war in Ukraine was supposed to lead to all sorts of commodity shortages and we have seen a substantial drop in all of the Russia-Ukraine centric commodities the past 6 months. The rationale for these declines has been slowing in China or overall slowing in global markets — a “de-globalization” trade which goes against what we are seeing today in stocks — up so much on soft landing expectations.

Then there are those who credit the rise in industrials to some nirvana taking place in US industry. Apparently there is a wide swath of American companies “coming home” to open up plants in the US, bolstering the economy. Again, this seems fanciful to me, as the whole point of the mult-national brand of crony capitalism is to seek out the lowest wages and import back to the US. With minimum wages rising in every single state, it seems incredulous that large corporations would abandon their 20 year plans in exchange for small shifts in FX markets over small periods of time.

For this rally to continue, we’d need more of the same:

lower dollar
lower rates
lower inflation
lower Fed hikes
lower commodity prices
Better than expected economic results

As for me, I entirely squandered the month, down 1.3%, of which -0.55% was achieved today in a most egregious way — fully long but with a late day 20% allocation to SQQQ which lost me 4%. I am carrying this hedge into tomorrow.

Generally speaking, I have traded flat for nearly 6 months in large part to my disbelief in any rallies and, at the same time, I’ve been reticent to short too much into the hole for fear of days like today. The net result has been slow and methodical progress or regression, quite the opposite from the beginning of the year which led to my +50% gains.

To reconcile this I’ve decided, at least for the time being, to employ the tactics I use with my quant, but instead of using the 1 month algo I will use the 1 week algo and simply reallocate once per week and trade around it.

My confidence lies in the fact that I am still fairly good at catching the downside momo and intraday trades, whilst at the same time keeping a fully long portfolio that has proven to be excellent this year. My quant closed the month +5.7% and is now +16% for the year and it has beaten me the past 4-5 months.

Overall, I am harder on myself than I reveal. Losing 1.3% in a month should not upset me, since it’s really nothing. Last month I made 3.3% and I haven’t lost money in the market since 2016. Nevertheless, I expect better for myself and keep missing out on trades that seem obvious but for whatever reason fail to act in time, sort of like today’s boondoggle with SQQQ. Had I just done nothing, my trading would’ve been up more than 1% today.

I believe the nature of the rally to be misleading and it will eventually be revoked. All of the overly optimistic viewpoints are based on ideologies that no longer exist: such as the Fed nationalizing the bond market to help stocks go up. The Fed hiking 50bps in December isn’t the same as the Fed cutting by 50bps. You cocksuckers are out of your god damned minds and I hope you permanent bulls die and rot in hell for causing me so much grief.

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MARKETS SPIKE ON POWELL COMMENTS

Classic spike post Fed speech, which we already knew was coming but so many of us opted to not act. The NASDAQ has spike more than 150 in the past 10 mins after Powell said the FOMC might slow the pace of hikes starting the December meeting.

The net result, as you could imagine, perversion on a scale that would make any ardent bear sick. We are seeing Chinese stocks, EV, FANG, and even the oils rise. The fucking gold miners are rising too.

Now whether this rally sticks is another story. Often times we get these initial Fed spikes only to collapse later on after the sugar rush wanes.

I will not be chasing into this lift, as I am content with small gains or losses on the last day of November.

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Hard to Keep Crude Down

Crude stocks are way underperforming crude today, with WTI up more than 3%. I suspect people view the $70s as a floor since the White House said they’d refill the SPR in the low $70s. They also said they’d release more oil should it spike and they also said they’re applying a price cap on Russian oil, rumored to be in the 60s, yet The Kremlin said they would not sell crude under any price cap conditions.

So there is that.

Early going risk appears off, as downside is led by the small caps. I’ve taken on a hedge via TZA and sit with moderate gains of 30bps.

For the balance of the day, I assume commodities will attract traders, since oil, gold, and copper are all sharply higher. I also assume the NASDAQ will turn lower, as the “FUCK JOE BIDEN” trade takes hold.

One thing is indelibly clear: military spending is going UP worldwide. American industrials are leading higher, mostly thanks to strength in the petro-chemical markets. Any substantial downside in crude and commodities would all but ruin this trade.

Tech is dead. Relying on consumer goods and services seems high risk given the economic outlook and basic materials are incredibly volatile. It’s not easy to hide in this market, especially in banks. Where can you put your money? TR comes to mind.

It’s not probable that we’ll see the economy bottom in 2023. This downturn is likely to last through 2024. Given the market is barely down for the Dow and moderate losses for the SPY, we still have substantial downside left if the GDP and jobs numbers continue to weaken.

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BAD NEWS: MARKETS WILL NOT CRASH IN DECEMBER

I hate to the the bearer of bad news for many of my loyal BEARSHITTING readooooors — but it seems markets want more of the same. We are +1.5% the past month and those returns, give or take 2%, should remain a constant. There just isn’t much fear out there now.

Unfortunately, the bulls have won and taken to the DOW JONES as a safe haven and will drive it higher into the New Year’s. We will find, by early 2023, the Biden administration boasting about the strength of the US economy and the specter of a soft landing, amidst Ukrainian victories on the battlefield and Americana de Pax spreading like COVID-19 across the globe, much to the chagrin of both flat earthers and CCP lovers.

Do not kill the messenger. I am merely a reader of tea leaves, and a trader of assets.

I closed higher by 20bps today, ending the day heavily hedged against the NASDAQ because nothing says “FUCK YOURSELF” like selling short into the joyous holidays.

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Market is a Lock on Tuesday

One of the more interesting TOOLZ inside Stocklabs is the seasonality data, specially the daily and hourly. I was BEMUSED to learn today, upon looking, that Tuesday has been a lock for the IWM since 9/1, now higher for 10 consecutive weeks.

If only judging by this, we are in fact doomed for the balance of the week. Nevertheless, at the present I have no shorts and just 20% long. I haven’t had any thesis trades for 2022, aside from my occasional FUCK BIDEN trade which is short stocks, long oil. But that hasn’t been working lately. I also liked CELH late last year and should’ve bought it when it got crushed; but alas here I am FLAT for the past 5 months struggling to find a salient higher.

I have been thinking about restaurant stocks, seeing degenerate RICK go higher daily and of course QSR, MCD and all of the other corporate trash eateries. If there is one thing worth betting on it is the fervor of the US eater to fill his/her/they/them fat stomaches.

BOTTOM LINE: Market looks good and refuses to gap lower, aside from tech which is dead. The Dow is leading the way up, due to industrial, consumer goods, and services strength. The oils are fickle and trade wildly based upon the underlying commodity. I am presuming we get more of the same until 2023, at which point I expect markets to dislodge and get swallowed whole into a volcano of fire.

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The War is Going to Escalate

A little news blurb just crossed the wires from head of NATO Jens Stoltenberg, who said Ukraine will be accepted into NATO after the war ends.

I think it’s fair to say the war against NATO via Ukraine went towards the worst case scenario for Russia but now they have a much larger task in front of them. Lose the war and lose your country. It’s really that simple. If Russia cannot win, Ukraine will host NATO nuclear weapons inside 5 years and will forever be lost. In other words, this war isn’t ending any time soon and the only reason why Russia isn’t directly engaging with NATO is because they’d rather not have to deal with its airforce and naval assets.

Markets are middling and look to want to tip over. The massive movers are Chinese stocks. Who knew all they need for 15% gains was another lockdown and riots.

I’m up 55bps early going and placed a UVIX hedge on just in case we flush.

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I BOUGHT THE DIP

I was going to short the fuck out of the tape because I really really want the market to collapse. But then I thought twice about it and conjured up all recent dips and how THEY mechanically stop markets from careening lower when needed most, so then I covered my shorts and kept a 70% long book, 30% cash.

My positions are moderate and if we bounce tomorrow, I won’t make a huge amount of money — but perhaps enough to erase todays -0.5% decline. I rarely get taken to the woodshed in any large drawdowns, since I play both long and short — as a professional risk manager should. If I was ONLY bullish, I’d be dead right about now.

Much of what we are seeing in this tape can be viewed cathartically via the Elon Musk twitter feed, who is absolutely losing it. Here are a few examples.

I’d be lying if I wasn’t entertained and hooked into the whole “FUCK THE ESTABLISHMENT” cunts vibe Elon is giving out. But then I remember he’s the wealthiest man in America and, like Trump, enjoys hearing himself breathe. I won’t be fooled into advocating for Musk — but will secretly enjoy and support him from the rafters. It’s important to have balance in all things and even though Musk has short comings, like all of you, he is serving a purpose to expose his ilk — which is partly demoralizing, partly invigorating. I haven’t made a final decision on this chapter in The Ending of Pax Americana; but it’s damned well entertaining. That’s for sure.

Ok, let’s hope for some upside tomorrow, so that I can sell and profit and then sink lower when I throw some shorts back on.

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SON OF A BITCH TAPE

You go out to get some eggs, a quick bite, and come back to see your brains have been blown the fuck out. This is the type of SHIT I have to come back to.

BULLARD: FED MAY HAVE TO KEEP RATES HIGHER THROUGH ’23, INTO ’24

AND THEN THIS:

WILLIAMS : FED COULD LOWER RATES IN 2024

How about you fuck yourself Fed’s Bullard and Williams. I am sick and tired of you commy fucks (EXTRA 1950s) interfering in my god damned market.

I had been short, but then thought it’d be cute to sashay right fast into a slew of HIGH RISK names. I even discarded my hedges because who needs hedges whilst flowing towards SATAN CLAWS? The US is #1 and we have the Ruskies on the run: SLAVA UKRAINI.

We have the fucking oil cap going, as we speak. The fucking Poles want to buy Russian crude, BY LAW, for no more than $30 and Estonia agrees. But the fucking MALTESE CUNTS suggest $65 to $70. Either way, it seems the Russians are completely fucked when it comes to oil. They will have no choice, whatsoever, but to sell their oil to Poland at cost. Granted the Russians are passing a law to prohibit the sale of oil to any country with a price cap, it should be noted that Poland might in fact LOWER their desired purchase price for oil to $25 if the Russians don’t watch their tongue around them.

I see prices are now dropping and my gains have magically disappeared with it, now down 70bps and hedged. I only hedged to prevent from getting routed. I know, quit being a pussy. But how about fuck you instead?

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CONSTRUCTIVE TAPE

Good morning

I hope you all stuffed your fat faces with plenty of yams this weekend. Now it’s time to get back to work.

Over the weekend the Chinese started to riot due to being WELDED in thanks to a fresh COVID breakout. The subsequent result was SHARPLY HIGHER Chinese stocks here in the states — because comedic relief is the best tonic for a sad state of affairs. Shares of PDD, JD and others — through the roof.

Retail sales in the US were good. Ergo, retail has a bid. The weakness is mostly in oils and banks — because both areas of the market seem to make sense in this whacky world we are living through. Ergo, and this goes without saying, oil is a zero.

Old man divvy stocks are bid once again and we are seeing a middling tape across the board with breadth at or around 52%. This is NOT the sort of tape I was hoping to see. There are barely, if any, blowups. If anything, a market which refuses to trade down in the face of overwhelming bearishness should be bought.

NEVERTHELESS, I remain hopeful in the collapse to come and have marshmallows ready for when I see the fires burning. I’ll trade long often when markets look constructive because I am not an ideologue, even though from an outside view I might seem like one. I am not, so fuck off.

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CHINESE REVOLT AGAINST MORONIC COVID POLICIES; FUTURES COLLAPSE

They’re welding in the people again in China.

This has resulted in a popular revolt and we could only hope death amongst the ruling class soon.

Let this be a lesson for all ruling class gentry: the people will one day rise up and rip out your entrails and festoon their porches with them for the pagan Xmas holidays (in Minecraft of course).

NASDAQ futs are down 100, even after BLACKENED FRIDAY sales topped $9.2b, which to be honest seems rather small. I don’t know how that is a record. Nevertheless, the Chinese markets are getting blown the fuck out, with the Hang Seng off by 3.5%. This discord of course pleases the CIA scum who want to topple the CCP and Iran, and Russia — so look for our media to stoke the flames of DEMUHHHHcracy in the coming days in order to export our degenerate brand of GLOBOHOMO to the orient so we can circumcise them and cajole their women to be independent workers who despise men and prefer to have sex with other women, and also adorning their bodies with meaningless tattoos, perhaps satanic ones, whilst setting appointments for their bi-annual abortions.

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