THE CLOSE WAS CRASHED, ALL HOPE LOST

I thought it was funny until it wasn’t anymore. I was barely down all session and then we STEAMED lower into the close. I closed down 1.7%, a formidable loss — but not my concern at least intraday. I am worried about tomorrow, which is why I sold out of my 2x TQQQ position and replaced it with a 2x UVIX hedge. I am in a 17% cash position and certainly exposed on the long side. In the event we violently flush in the morning, I will close out the UVIX and go long. If we gap the open, I will close out the UVIX and probably most of my longs.

I permitted myself to be comfortable today and didn’t take the selling seriously. There was immense damage done to the tape, in a number of stocks.

Irrespective of what the market does tomorrow, the next phase of this bursting of the bubble will be job losses, millions of them. By Fall we will be discussing how best to jumpstart an economy barreling into depression.

Perhaps a world war will save us, financially speaking.

After so many accounts have been emblazoned with losses and the margin call telephone festooned with the guts of all of the zeroes out there, I have decided to bulk up long here. I doubled down in all of my positions and even started one in UPST, now trading 2.3x sales — an absurd valuation all things considered.

I am cognizant of the fact that Tiger Global, Ark Funds and many others are getting their brains blown the fuck out — but I am old enough to remember all of the previous fires and how they burned the brightest when they were just about to be extinguished. Shorting here is on par with believing “this time is different.” In many ways the dynamics of the market IS different, with the Fed fixing to screw us. Also, this is merely the opening salvo into what will likely become a depression. That being said, I am not in this for the long term and I am merely trading to and fro. I was up 1% earlier and then after I doubled down my losses accelerated to 1.6%. Right now I am down 40bps, basically a giant nothing burger, with 13% cash.

The temptation is take quick profits is always lurking. However, there are times and places when you must take a shot and seeing so many stocks down more than 10% today (390) has me believing in a capitulation near term bottom trade might be happening today.

With 1 hr left to trade and stocks back to selling down, it looks like we might CRASH THE FUCKING CLOSE. I will reserve the rest of my cash and margin for an opening flush out tomorrow.

As hard as stocks have been hit YTD, today is really adding insult to injury with absolutely mind boggling declines.

Here is a look at the bloodshed.

U -36%
KRNT -32%
COIN -30%
RCUS -28%
FVRR -25%
MSTR -23%
ADV -23%
UPST -22%
BRP -21%
TXMD -19%
NVAX -19%
CVNA -18%
AFRM -18%
RYI -17%
DISH -17%
BGNE -17%
SG -15%
SI -15%
SQ -15%
AMC -15%
BSY -14%

IN ALL, MORE THAN 390 STOCKS ARE DOWN 10% OR MORE TODAY.

I would have to admit, I fell for the imaginary bottom. I could see it all, me walking on it and then propelling myself upwards to the sky, perhaps a sojourn to the moon with some cheese and champagne. But it was not meant to be. My losses pale in comparison to yours, but they hurt just as much! I had been, earlier today, a genius. I had 100bps of gains whilst being 80% in cash, safe and secure. Feeling a bit under the weather, perhaps infected with COVID or more likely some seasonal allergies, I went to take a nap and dreamt of the Dow being +400. It felt so real. When I was awoken by dogs needing to be walked, I discovered, sadly, the market had reversed and careened lower. My aspirations were castles of sand and my dreams retarded.

I am presently down 40bps, a 1.4% reversal in fortune, because I believed. Also, I bought shit stocks in the hopes of miracles.

I’ve committed numerous errors today and it always happens from a position of comfort. I must remember the pain and how it feels to be pressed up against the swords of Damocles. My intention is to hold, only because of stubbornness. What I should be doing is liquidating now — because nothing is redeemable and everything is rot.

It was one of those economic stats that could do no wrong. We already knew inflation was hot, but in the offchance it came in light — we’d moon.

But the data didn’t come in light and we reverse mooned into the grave. However, upon opening of the markets, we are once again rallying.

CPI 0.3% MoM; Exp. 0.2%
CPI 8.3% YoY, Exp. 8.1%

CPI Core 0.6%, Exp. 0.4%
CPI Core 6.2% Y/Y, Exp. 6.0%

— The_Real_Fly (@The_Real_Fly) May 11, 2022

No one should care about the CPI data because it’s backward looking. At this point only three things matter.

1. The war

2. Economic growth or lack thereof

3. Commodities

The absence of sharply higher oil prices was beginning to wane on people in recent days. The idea oil could trade lower without Russian oil on the markets would equal some sort of economic apocalypse around the bend. Now with WTI +5%, we all feeeel better.

We are extremely oversold and markets act weird during periods like this, since so many people are getting wiped out. It’s rare to see markets V shape recover from such carnage. I would expect a process to take place, but at some point all of the pent up fear and loathing to turn into a different kind of fear of missing out and loathing for not buying when everyone else was selling.

Let’s assess the situation.

The bubble has popped. All of the 30x sales stocks are back down below 10x, some a lot cheaper. This is a traditional valuation level for growth, pre 2016.

The economy is slowing but the Fed can’t help due to high inflation, measured by the CPI.

Therefore, if tomorrow’s CPI numbers comes in even a little bit better than expected, markets are going to absolutely  rip to the upside. We should soon enter a period of stability, where inflation is waning as the economy slows. To avoid earnings disasters like UPST, one could not buy stocks ahead of their results. Markets might improve during a slower inflationary period based on the notion the Fed can get less hawkish. HOWEVER, by the time summer swings around, the entire focus of the market will be on employment and economic growth. The major major concern isn’t inflation — because plunging share prices and growth rates solves that. The bigger issue down the road is economic prosperity in an environment that is deleterious to anything on par with scaleable globalized growth.

War looms and relations with east worsens daily. Ergo, take profits fast and don’t believe in bottoms.

I made 0.35% for the session, closed with 60% cash the rest long.

SIRS —

Because I built my time machine, aka Stocklabs, during the market meltdown of 2008, I can tell you with clarity how oversold we are now in comparison to then. At the session lows today, this was the 7th lowest technical reading since inception. We were nestled right around 1.00, now with the market rising we are at 1.20.

What does it all mean?

It all but guarantees a face ripping rally just around the bend. My issue with this idea, naturally, is that it’s too damn scary. I prefer the comforts of cash and view bargains as a cause for concern. This of course is psychological warfare and I am accustomed to seeing carnage on Wall Street and have been victim to heinous losses in the past, so of course I am reticent to jump right in. Nevertheless, I am comfortable with several approaches here.

1. NO HEDGES. DO NOT SHORT INTO OS
2. Buy the closes for morning bump
3. Opt for ETFs over stocks in order to avoid earnings and/or dilutive secondaries after the bell

My preferred ETF is TQQQ, but TNA, LABU or SOXL work too. I am of the belief that markets should be avoided intraday, unless of course you enjoy babysitting brimstone. I will be buying the close, with the vast majority of my money in cash and perhaps a small allocation into consumer staples.

As for energy, I am extremely gun-shy to buy the dips in commodities. The price action is suggesting the economic fallout to come will cause a complete reversal in inflationary pressures, irrespective of Russian supply disruptions. This makes no sense to me, but this is what the market is saying.

If Tiger Global goes out of business, everyone is going out of business. The once $95b hedge fund that does not hedge but goes long lunatic tech stocks only reported a loss of 15% in March ($17b), like morons. YTD, their STACKED LOSSES are 44%, representing 2/3rds of ALL OF THEIR GAINS dating back to 2001.

Let me clarify.

The last 4 months of trading caused the gurus running Tiger to allow the market to abscond with 66% of 21 years of capital gains. DARE I SAY ‘GOING OUT OF BUSINESS SOON?’

Judging by today’s action, once again a fierce reversal and plunge, we have liquidations taking place en masse. I would not be surprised to see the likes of Chase Coleman III on the soup line over the next 3 months, as clients withdraw funds and those businesses and their losses become so obscene, it would BEHOOVE them to continue it any longer.

I have been 100% cash since 9:35am, +48bps for session.

Last night there was a heart attack panic session in cryptos, thanks to a stable coin breaking peg. BTC-ETH have since recovered. Also with it, NASDAQ futs are up 232 and part of the alleviation is the fact that Russia’s Victory Day came and went without note.

Now this morning US interest rates are plunging, down 11BPS and natural gas is down another 7%. If I didn’t know any better, I’d say this looks like it might be a short term bottom, all praise to Stocklabs for once again nailing the bottom.

I had bought TQQQ yesterday for a trade and will keep it in my algo driven account for 5 days, but am likely to sell it in my trading account. I understand why some of you might want to hold stocks, hoping this is the bottom and the upside is oh so grande. But I just can’t accept the fact that markets might be bottoming before we got the chance to see some bad unemployment numbers.

That said, PFE bought BHVN today and that might help rally biotechs. Then again, NVAX is down 25% today.

It’s a hard tape and expect more earnings shortfalls, like UPST and GDRX to unravel and have you call into question the existence of God.

For now, I’ll fade the opens and play the closes and seek to make gentlemanly returns, in this environment of stock toxicity.

TerraUSD is supposed to remain “stable” to the dollar, as part of one of many crypto funding schemes that I will not pretend to even begin to understand. What I can relay to you now is a massive crisis happening in cryptos, stemming from this stable coin decoupling to Mr. Saylor’s MSTR now underwater on his BTC, and rumors of margin calls at his company.

THIS IS NOT A GOOD LOOK FOR CRYPTOS.

This all harkens back to Tether funding schemes and now one wonders if this could happen to TerraUSD — can it happen to others?

LUNAUSD is also in collapse mode, not to mention just about every other crypto out there.

People parked money in this so called “stable coin” for security and it turned out to be a scam, on par with money markets breaking the buck. Unless they get a bailout, which I doubt, this will have lasting effects on the entire crypto space and the stable coin concept forever.