CHOPPING SEASON: Market Rallies Again on Terrible News

Below is the hourly returns for QQQ during the month of July, via Stocklabs. In other words, buy the morning dip and fade the close — get chopped in the middle.

IT BEHOOVES ME to see markets rally on this bad CPI number. Then again, markets ALWAYS want to trade higher and even in the worst tapes, save 2002 which was abysmal all year long, markets rip rally on anything that can be viewed as “good news.”

Today’s “good news” was the CPI data was “stale” since prices of commodities have tanked since then and this, potentially, could be the worst of it. In short, the inflation we are seeing is once again “transitory.”

I am not good at trading chop like this and should have much less exposure than I have now. I opened up 35bps, extended those gains with a quick GUSH trade and then ended up chasing the rally and now find myself with a curious blend of longs and shorts, but still bleeding out — now down 0.45%.

I told you yesterday Le Fly was finished, fin, because the market dynamics changed and it usually takes me some time to figure out the new algorithms to get back in sync. Last year I was out of sync from spring thru winter, plodding along with monstrous gains that had been achieved early in the year. While I am not “bleeding out” per se, only down 1.5% from the highs, I do not feeeeeeel in control.

CPI came in hot as fuck at 9.1%, the hottest rate of inflation since 1981. This jump has caused the odds of a 100bps hike at the next Fed meeting soar to 35%.

As a result, the entire market melted away and is now gone. NASDAQ FUTS are down 275 and VIX is soaring.

I step into today’s melee 25% SQQQ, 10% UVIX.

The Fly is back.

I had numerous chances to sell my DWAC and did not take it. I had gains in BEAM and looked the other way. I took a MONSTER 25% position in SQQQ and saw the market collapse yet I did not book the gain. I trading like a massive piece of shit today, the sort of passive trading one does when one believes God himself is into bestowing profits unto you. It was the very worst trading session for me since January, in a year that has been charmed with win after win.

I have no desire to couch my losses with words of encouragement or items that I might bring up to make the reader believe that I will make it all back. I am finished, done. The winning streak has ended and if I’m not careful I will soon be staring down the barrel of IMMENSE losses.

Month to date I am now down 0.9%. This could be just the beginning of my losses, as I am prone to partake in during periods of not knowing the fuck is going on. I simply fall out of sync and remain that way until I make fundamental changes to adjust to a new paradigm.

I am positioned wrong into tomorrow’s CPI numbers, with far too much exposure into a news item that I have no idea what is to come.

The Fly is over, 100% done.

The past 3 trading days I’ve been ENTREATED to losses of greater than 2%. This is a rare occurrence for me, a person who seemingly prides himself on prevailing SHARPE ratios and sublime market hand. If I didn’t know any better I’d say my streak is over. Fin.

All of the automatic gains were predicated on WAR, high commodity prices, and lower stocks. We are now in a new paradigm where the opposite of that shit is trending.

Now I will attempt to assimilate into this new trading environ, but I know my biases are too strong and I will knee-jerk right back into the early 2022 trades.

I closed out my hedges and now have all longs, 35% cash, -2.5% for the session like a gorilla brained loser.

It seems the market tends to believe an appreciable decline in oil is in a vacuum and not the net result of slowing economic activity. I say this because each time we see oil get poleaxed retail stocks rally.

Logically this is a consistent trade. The lowest energy and other commodities go, in theory, the more expendable income plebs will have. The problem with this theorem is that is all but rules out economic hardship and assumes once oil drop the economy will come right back.

Naturally this is possible, but not likely given the state of rates.

HOWEVER, should we see this oil price plunge even further into the $80s, we might begin to see the CPI plunge and give the Fed an excuse to pause, which would provide markets with an excuse to rally.

I am not saying this is what will happen, only describing the rationale.

At the moment, I am heavily long retail names, still hedged via TZA.

I have to admit, this decline in WTI caught me off guard. I was only positioned into natural gas stocks this morning — but the entire commodity complex is under pressure again with WIT off by almost 5%.

Futures were down big overnight but firmed up considerably and now we are up. The gains are led by tera caps — but I suspect it will be short lived.

I am short via TZA, so I am hoping for the smaller caps to come under some selling pressure. Normally I clean out my portfolio in the morning, but I might hold onto my positions today, since I do believe natural gas stocks should trade up, small caps down, and Donald John Trump’s DWAC will squeeze the life out of those short.

I am starting the day horribly. The tennis ball machine was LOCKED in the locker. I left my sunglasses at the restaurant last night — and my house is filled with dust from renovations.

UPDATE: I SOLD ALL BUT TZA AND DWAC. I was holding onto losers like a loser.

It’s over again. All hope was lost today, with exception to shares of DWAC.

I ended the session long commodities, DWAC and lots of TZA — 35% cash. I made 41bps, which isn’t a lot — but nothing in comparison to what your losses were.

Bottom line: The bulls have tried and failed to gun this market up and now shall receive nothing but the black flag. I cannot fathom a scenario where bools get back the initiative, but we shall see.

The answer is YES, in my opinion.

There is no doubt in my mind DWAC will, at some point, COLLAPSE and file for chapter 11 bankruptcy. It cannot survive a Trump death. However terrible a thought, Trump is in fact still alive and well and the MAGA-TRAIN is revving up to crash into the GOP party for the 2024 elections.

With Musk out at Twitter and Trump in at DWAC — there is a trade here — especially a short squeeze.

Why the fuck not?

All of the selling in commodities will soon come to an end once people realize the winter is coming and with it colder climes and Russian gas/oil/grain will be in short supply.

There was a report out today that Spain has purchased 4x the gas is normally does since June from Russia, which is most likely then being sold to Germany and other belligerents in the war. We are in this phase of pause now, whereby markets are drifting higher due to lack of bad news. I suspect this leniency will run out cold by late August, so if the market is going to mount a run — it better do it now.

I cannot place myself to be long tech/retail stocks in this environment and I also cannot just sit around shorting stocks whilst the indices are firming — so I am longing commodities and talking my book extra greasy.

One of my top picks is MOS — based off the idea that ESG climate action is a scam and eventually, like it did in Sri Lanka, will fail. Other no brainer ideas include CRK, SD, BTU — etc. I am talking my book.

All of this will be hedged with TZA long.

It’s happening now. The recession that was never meant to happen is happening. We have a collapse in sentiment and German natural gas imports have been hilariously halted. The world wars were for nothing, as Germany is back at it again — attempting to kill Russians in what appears to be the sole purpose of the German government. You’d think after all of the history between the two nations, the Germans would sit this one out neutral. But they simply cannot help themselves.

We also have parity with the Euro and dollar — a staggering decline for the currency that is a foreshadowing of a great doom to come between the liberal world order and the east.

I’ll refrain from making predictions outside today and only suggest that you cash up and/or hedge — because this fucker is going to fly into the floorboards by the close.