FOOLED

When I saw futures tumble last night I knew what I was in store for since I decided yesterday to not hedge and to barrel into today with large long exposure. I haven’t turned on my monitors until now, furious at myself for being fooled, tricked even, by a very predictable and unfortunate outcome.

The market didn’t rally today because this is a bear market. Yesterday we all basked in the glory of the market bounce and today we suffer from the pangs of hubris.

It’s over and has been over for quite some time. In true bear fashion, all hopes and dreams are crashed against the rocks of reality and all fantasies of yesterday are almost mirages, mere memories of a time when pain and suffering wasn’t the main focus of asset prices.

Im down nearly 3% today. All of my work for the week destroyed. I’ll have to decide whether to go further into this hole and pray for a bounce tomorrow or get back in line with the bear.

Today was a classic bottom. We had pandemonium in Asian trade, paired with blowout FX markets and bonds — not to mention Apple’s warnings. Today we reversed up and closed with nearly 90% breadth. Granted, we had a limp close — but I believe that to be a trap.

By the textbook, based upon the collapse in the 10yr, rise in Euro and GBP — we should continue higher tomorrow and climb the wall of worry into the quarter end.

I spoke to an old friend of mine yesterday. You might know him as “The Devil.” I will have you know, he made the call — went long yesterday into the panic, and more or less shares my opinion for continuation.

IF we fade tomorrow and continue down, we might really see a panic. But let’s not even think about such a scenario.

I closed +150bps in trading, +313bps in quant and +10% in algo account — no hedges into tomorrow’s grande show.

For many years since I created the mean reversion algos of The PPT, then Exodus and now Stocklabs, I search for ways to use the signals for short term trading. Most of the time the signals were accurate and one buy would suffice. But on occasion, there would be broken elevator trading action and the OS signals were laughed at by the market and dove lower through them.

But I think I have solved the issue in regards to position sizing and timing my buys — using the signals.

This is how I do it now.

Upon an OS signal, before market close I made a 33% allocation into either TQQQ or TNA. The holding period of this position is 5 trading days — win lose or draw. The holding period can be extended only if another OS signal appears, at which point I add another 33% and reset the holding period to another 5 days.

Presently I am 100% long TNA due to consecutive OS signals. This account has done maybe 7 trades all year, +18% at annual highs.

I am tempted to sell being up 8% for the session, but cannot. Rules are rules. This TNA position will remain in place until Monday.

With the yuan crashing 1.2% last night and NASDAQ Futs diving 150, I thought for sure we’d get a horrid open. But instead, 70% of stocks are up. This is classic look into the abyss but come out a man trading action.

I closed out my UVIX hedge and added two longs, just in case this turns into a ripper. I’m still 66% cash, so I have plenty of reserves to defend my positions need be.

+55bps early going and liking the action.

This is the situation. All metrics inside Stocklabs point to unprecedented levels of oversold. We have various metrics that go back decades and the current market you see here is on par with the worst technical set ups. I seem to be saying this often because the deleterious degrees of this downturns keep getting worse — from dot coms to financial crisis to COVID lows to SHMITA.

This is where we are.

Not only are we on the verge of World War, we are also in a situation where the demand for dollars is a significant stress on foreign banks. The result of this has been an upending in EUR, GBP and JPY crosses. The Fed hikes are creating an environment where people only want dollars. The spikes in yields are the result of investors finally believing the Fed will raise rates into the fires of poor economic fallout.

The stated goal is “shock n awe” markets and collapse prices fast, in order to defeat inflation, followed by a Fed pause which they hope will satiate and stabilize markets.

All of that, however, is down the road. What we have in front of us is a terrible tape. The Nasdaq is down 9% for September, the worse September decline since 2008. This time is different?

Probably not.

Since all metrics point to an oversold bounce looming right around the corner, I am biased and positioned long. But, because this set up is so terrible and the extent of time we are oversold, I am apprehensive and have hedged my longs with UVIX.

I closed out 67% cash, 10% UVIX — +2.2% for the day.

Good luck.

Banks had been weak all day, even before we collapsed. The NASDAQ gave up a triple digit gain and is now down 25. This is a small loss and the size of it should not be feared. Instead, you should concern yourselves with where it’s going now.

SCORES OF REDDIT FAGGOTS are now inside of the Brazen Bull being cooked alive. Their staying power is limited and their margin clerks are on them move. Look for a capitulation move LOWER in the coming hours, as Reddit gets eliminated, once and for all, from the game of play.

I am long TNA at 7.5% and UVIX at 5% — and my bias is to be long. My bias is long because we are so oversold. At the same time, I understand bottoming is a process and sometimes it happens out of the blue and other times in a predictable manner. This one feeeeeeels different, as if it were paired with some financial disaster that looms.

The tell was the US 10yr continuing to get pounded into dust, yields shooting up to nearly 4% for the session — coupled with the fact that tech is weak and the entire rally is weak all things considered.

I locked in gains of 190bps and moved to cash and then nibbled on just a little UVIX — just in case we truly collapse today — which I place at 15% chance. I remain fully long in Quant and my Algo driven accounts and should the market turn higher again — both will do exceedingly well.

However, after such a rout in markets — to have such a tepid rally is dangerous. Remember, there are scores of people out there dying to get out and will sell at the first sign of weakness. We have that weakness now and should markets continue lower — this small downturn will become a large one.

Best case scenario, we moderate and base out until 2pm and then get RIGGED higher in a classic freedom candle manner.

I place the odds of that happening at 12.5%.

I got chewed up most of the session with poorly timed DRIP and UVIX positions. I extricated myself from DRIP at a minor loss and doubled down in UVIX at the lows and ended up profitable in the position as the market swooned lower into the close. I ended down 0.5%. My approach to this collapse is to methodically add to TNA at 2.5% weighting increments and add to already down DK and BTU boon-doggles. Although I am bearish and in my heart want to preside over a truly horrifying crash, I do not think the ultimate collapse is here yet.

No need for a long tedious blog. Most people are bearish now, so we’ll probably bounce soon. I am looking for a gap lower in the morning followed by a rally.

Congress is about to approve another $12 billion to the fucking Ukraine, right after Biden gave them $450m to fund their police and justice system. Even though it is Russian clay, the Ukraine is American property and the people of Ukraine are our puppets to do as we like. In this regard, we want them to kill Russians and die disproportionally against a superior enemy, whilst our fighter planes collect dust in floating aircraft carriers and our soldiers remains in their nice warm forts in Poland and Germany.

It should come as no surprise to anyone in markets now to see the really rally FAIL and now COLLAPSE. We have bonds CRASHING thru the fucking floorboards, with the 10yr up an astounding 16bps to 3.85%. Junk bonds, AAA rated — UK GILTS all crushed over the mantle of US policy in Ukraine.

Reuters reported earlier US shortages of natural gas due to us converting all supplies to LNG and shipping it to Europe.

It’s important to note the profound and unmistakable malevolence in which policy has been thrusted upon people here the past 3 years, first with the BLM riots, and then with COVID, and now with this shit. The definition of democracy is policy by empowering the people. Ask yourselves — who the fuck is being empowered now?

Happy SHMITA day.

Last night the British pound got annihilated, down as much as 5% to 1971 lows. The FX markets were absolutely lit and the only thing gaining v the dollar was King Ruble, which is up 22% against the dollar YTD and +34% against the Euro.

The sanctions have been an absolute disaster.

We are rallying now and it must feeeeeeeel good to those of you on edge and on the hook. I’m here to tell you, however, this is most likely NOT the bottom. It’s too clean and easy. Typically we get a false move up, collapse again, and then bottom.

But maybe this is it. Maybe the worst is behind us and it’s purple unicorns and gay giraffes from here.

I’m long with ample cash, no hedges, but skeptical.