NASDAQ RACKED FOR 420

Stocklabs did not flag OS into this maelstrom but it did for individual ETFs like QQQ and the data is poor, which bodes poorly for the poors long stocks here.

Listen to me.

We are at Defcon 3. Russian military assets are on the move near Alaska. They cannot defeat the US head to head, so might as well detonate some nukes over DC. This is where our leadership has gotten us and I don’t blame Biden. American Presidents are not in charge, as clearly shown by the Trump admin, who resorted to tantrums on Twitter rather than wielding power.

Pax Americana is over. I have been telling you this for a year now and I hope you’re starting to understand it isn’t us vs them. We have no natural enemies in Russia or China. The enemy is within.

I shed 15bps in my trading today, made almost 2% for the week to start October. The session was maligned with startling losses and those losses might doubled up soon.

NFLX is 38% off the lows.
AMZN is 12% off the lows.
AAPL is 8% off the lows.

Should tera cap tech drop 10% from here, expect another 15% lower in the overall market. Under those deleterious conditions, one would expect to see black smoke and shards of metal bustling throughout urban centers — balls of fire presiding over the countryside — creating infernos out of corn fields.

As such, I ended with a heavy UVIX and DRV positions, hedged with some SOXL and mixed in with long CRUDE (not oil stocks but fucking crude you asshole), short euros, and short bonds.

I look into Joe Biden’s sunglasses and see the visage of his iced cream cone and sell short every single time.

WTI is up more than 4% now.

This is what I’ve done so far.

I closed out my short bond/euro trades since they were meant to be low alpha hedges which turned out to be pretty high alpha. I had done some trades early going — long and short — all profits. I am now 16% weighted in GUSH, in the hopes of a small pocket, or respite if you will, spearheaded by the fact that oil cannot be checked.

We are now in the inexorable position is ramping commodities and a very strong economy — paired with rampant inflation that is causing anguish amongst people on fixed wages. Because of this, we are in a very vulnerable position for equities and I’d be SHOCKED if the market didn’t close at the lows for the day, ahead of the long weekend.

With the NASDAQ down already 350, there is room for a 50-75 point move — but I would not suggest that is a high probability play. Breadth is hammered lower at 25% and that’s only because oils are up.

Breadth for tech, for example, is 16%.

Botton line: prepare for a raping or two, if you’re buying tech into this crash.

Unemployment tumbled to 3.5%, which means the Fed has more work to do. What sort of work does the Fed have to do? They need to fulfill their mandate of totally destroying the economy.

Jefferies:

“To the extent that there are any implications for the Fed, the data brings us back to where we were before last month. There is not a lot of capacity for the labor force to grow, and thus strong wage pressure is going to continue to be an issue. We still expect another 75-bp rate hike in November.”

First thing I did this morning was liquidate my entire TNA position, keeping my short Euro and short bond position intact and then I bought NRGD to bet against crude — soon after booking a 3.3% gain.

For the session I am +15bps.

Do we buy this dip, on a Friday?

No.

The economy is too damned strong and the self inflicted “good inflation” the Fed had targeted back in 2020 is now a malignant problem that needs to be reigned in. The only way we do that is by hiking rates to match inflation.

Tomorrow we get the jobs numbers.

Here is my take.

1% down, 2-3% up.

The numbers should be bad. If so, retarded trades will think this might cause the Fed to pause. The entire bull thesis now is depending upon FOMC mercy. They have nothing else going for them. If the numbers are strong, we will trade lower — but not too much since the assumption will be circulated that the numbers were BACKWARD looking and future numbers will be horrendous.

Either way, I think yields go up and I also think the Euro smashed its stupid face against parity with the dollar.

Ergo, I am 10% weighted in TMV, 10% EUO and 20% TNA, 60% cash.

I gained 100bps today, mainly due to some smart intra-day trades.

Ciao.

Back in 2008 I was still managing money and I had to give ultimatums to clients to go to cash, short, or transfer out. I was so convinced we’d have a catastrophe I was willing to throw away business, which is something I am rather adept at doing.

Down 30% here might seem like a lot and for your average trade getting RACKED in his “Diamond handed” TNT bombs via Reddit — this current swoon might seem like enough. But it isn’t.

In the event you are mandated to be long only and need areas of the market to hide, might I suggest a heavy concentration in oils/gas or perhaps some staples? Normally, client portfolio should look like the S&P, which means 10-15% allocations in all the principal sectors. If you are leaning heavy tech because MUHHHHHH “we’re cheap” — you are being greedy and setting up for failure.

Here are some stocks that are up YTD, non basic material.

Consumer Staples:
ABEV, CPB, GIS, K, CTVA

Financials:
PGR, ITUB, IBN, BSBR, ALL

Healthcare:
LLY, MRK, BMY, CI, VRTX

Industrials:
LMT, NOC, GD, PWR, CSL

Services:
MCK, AZO, ABC, CAH, BAH

Tech:
TMUS, ATVI, ENPH, AZPN, PCTY

If long only and long term, the way to withstand the coming fires is to BE BORING and flexible. Assess your positions quarterly and make adjustments when needed. DO NOT permit XYZ to just sink and sink without placing a line in the sand. In Stocklabs we have longer term algorithms to pick stocks over longer time frames and they work. Our quant is completely automated and we re-assess and redeploy it monthly and it’s up 9.5% for the year — thanks to the criteria I have filtered and our technical algos.

Don’t just fucking sit there and wait for someone to help you. You are the one who needs to act.

I don’t need to read research or look at news. Whatever is happening to REITs has happened before, sans the SHARPLY HIGHER cost of capital for a dreadfully capital intensive business. Let’s also not forget bonds are yielding greater than 4%, which competes with some REITs for capital now.

Look back on the IYR and previous crashes, you can see this recent squall might have further downside.

The rapidity of the decline has hastened in recent weeks and borders on a fucking crash now.

Best way to profit from the demise of the REIT is via DRV. The old school method was SRS. I must admit to be somewhat surprised by the manner of this decline, way outperforming XLF to the downside. Typically banks crash and then REITs. For the most part, banks have been awful, but nothing atypical.

The market makes a fool out of me from time to time. My previous blog was alluding to the grandiose excellence of the price action. As soon as I published it, we collapsed.

Now the NASDAQ is encroaching on -100.

Here’s what I’m doing.

I kept the TNA, TMV, EUO, and added to TMV. For higher beta hedge, I took a 5% position in UVIX, and believe it or not I also added to my TNA and will continue to catch it as it falls. If I can find the right equanimity and heft in my weightings, I’ll be able to pivot quickly when and if the market turns back up.

I gave back 40bps of gains and now sit +45bps.

We shot up as soon as markets opened in classic ‘fuck you’ fashion. This is why I often liquidate all opens, since trends are countermanded at a drop of a hat, only to later on resume.

My thesis heading into today was a down open. I got it and covered some my shorts and then followed up by selling my longs. I did this whilst replacing them with TNA for simplicity purposes.

The price action is bullish and I’ll try to refrain from meddling in my own affairs today. I’m keeping two hedges in place: short euros via EUO and short bonds via TMV.

The fact that the dollar is strong makes me uneasy about being too long, so I’ll likely keep my 75% cash position intact.

+85bps early going.

UPDATE: upon publishing this, we collapsed the open. Go figure.

After the morning drop, markets bottomed as they normally do around noon and proceeded to go higher for the balance of the day, up until the last 10 mins.

Was this a win? The NASDAQ fell 27. I’d say this was a fine day, when considering the NASDAQ just rose 5% over the previous two days. I tried to establish a mental ability to be net long — but failed. All of the data I could gather pointed to a down Thursday and down Friday. Seasonally, according to Stocklabs, both days are the worst days to be long. Of course this trend doesn’t mean it can’t rest or reverse — but it’s a trend nonetheless.

The three things I have been watching closely: CS, bonds, euro — all went lower. Ergo, I carried a net short position into tomorrow — based on the fear if they continue lower tomorrow the market might not be as forgiving as it was today.

I am most bearish on banks and healthcare and indifferent on energy. They look good and the narrative is strong — but they’re overbought here. I’d also like to note that the commodity trade has been a bust for months, which makes me call into question the validity of how dependent we are on Russian commodities. For every shortage panic we hear about, nothing ever happens.

I lost 22bps today, up around 1% for the week. My bias is to be short, so naturally it’s quite an achievement that I even have some gains all things considered. Even so, to be bearish the first few days of October was to be wrong. It felt fine shorting into holes during September but everything seemed to flip with the new month, psycho Wall Street style.

BOTTOM LINE: My bias keeps me going back to net short. My fear of traders buying morning dips keeps my short positions relatively small. This dichotomy has led to me trading small and hedged. The NASDAQ is lower 16% from July through August and now with a 5% uptick into October — color me skeptical in regards to chasing here.

This is an interesting set up. We bottomed out early morning and have been trending up in the face of what appeared to be a harsh revoke. As it was setting up, I closed out both UVIX and SQQQ positions and bought some GUSH. I am flat for the session — and have recently added TMV, more short euros via EUO and traded in and out of VLO for the session.

The reality is this.

Risk stocks are still down 2% for the session.
The US 10yr is +15bps
The Euro is down 1.18% v the strong dollar
CS is down 6.8%

Add to that the fact oil is bid higher, we have a developing narrative of inflation again, which we understand is a negative for stocks in the short term.

All of the things that red flag for a down market are present today — and it’s worth noting in spite of the recent hour or so rally — we are appreciably lower. There is a desire for markets to rally on all days by the PERMANENT BULL class of investor — but some days are just lower.

On a side note, after some studying of my entry and exits, I’ve decided to leg in smaller — at 2.5% of assets unless extremely confident in the position. My normal position sizes are 5% and I will at times increase it to 10% and on rare occasions higher. Generally speaking, my trades work — as proven by my returns. However, due to the volatile nature of these moves, coupled with the fact that at times my ideas are good but my timing off by a little, I’ve decided to leg in smaller at 2.5% with full intent of increasing to 5% by session end.