No Iranian Strike Bounce

This morning’s bounce is brought to you by Iranian generals who decided not to attack Israel. The result: lower gold/silver and oil/higher stocks.

However wonderful it might look, I’m hesitant to jump into the fray before 12pm. Lots of reversals occur in the morning, especially when lots of traders needed this respite to avoid blowing out. I would expect profit takers to overpower zealots in the morning. It’s very possible this bounce will continue and perhaps produce 3-5% upside. But I want to wait in some old man stocks and cash for a few hours.

I closed out my leveraged plays and my $SQQQ hedge and although tempted to long heavily — I am waiting a few hours.

Many of you are surprised over the recent events and ponder for the future. Have you already forgotten 2022 and the suffering it brought to investors? It was a year that was supposed to kick off the beginning of the next great depression, only saved in 2023 by a stasis in Ukraine and reduction in inflation, causing people to go insane for shares of $NVDA.

But now we see the elite we permit to rule us have no idea what they’re doing, wasting and squandering away 250 years of American excellence for nations that 99% of people here couldn’t give a flying fuck about.

Markets were never supposed to come back in 2023 but they did and now we are here, seemingly at a crossroads. It’s worth noting, stocks are not supposed to fall in April. The $SMH is down 11.5% for the month and only 3 month’s in recent history did investors absorb such a vicious blow: 2022, 2004, and 2002.

What worries me about this tape is the possibility of a 2022 redux, which would include an absolute collapse in all asset classes, including $BTC. Right now there isn’t any fear in the tape. Most traders are confident that prices will go up, predicated on what I do not know. For the past 6 months people were fixed on the FOMC lowering rates. Well, that isn’t going to happen.

So in this high rate environment, the following are chief concerns.

How the fuck are companies going to refinance their debt and now lay off workers at these high rates?
Normies cannot afford homes at 8.5% with prices at record highs.
Commercial RE is basically ridiculous.
Consumer spending will be affected; the math doesn’t lie.

We’ve had a good run and 2022 was the geopolitical and monetary policy warning of what could happen. Nothing has improved, other than inflation coming down from 10%. But it’s still elevated and the cost of money is at recent highs. I will keep an open mind for being wrong, but I think the possibility of a bear market for the remainder of the year should be considered, especially since stocks aren’t even down that much from their highs. In other words, you still have time to save yourselves.

Everything loved by the market was flung into bonfires and burned alive this week. Losses in notable names for the week.

$NVDA DOWN 13%
$ARM DOWN 31%
$MSTR DOWN 20%
$SMCI DOWN 21%
$TSLA DOWN 14%

On the upside

$UAL +23%
$UNH +14%
$ELV +7%
$GIS +6%
$PM +5%

For the month, the $IWM is down 8% and the $SMH has been fucking hammered into dust for 11.4%. But as bad as the market has been, we are not even close to bottoming, algorithmically, and without panic there will not be a capitulation sell off that can place in a hard bottom.

For the session, I was perfectly calibrated, finishing up 47bps. My longer term accounts didn’t fare too well and that is always expected when markets get routed. You can have two approaches, maybe 3. You can be tactical and beat markets, which I’ve proven possible since blogging live in 2007. Or, you can associate yourselves with the prevailing trends and trade with markets, which isn’t the worst thing in the world since markets generally trade up. However, in those periods of duress and calamity, you might, sometimes, wished you were just a little bit like Le Fly.

Here is my full portfolio into the weekend, 20% cash.

Good day,

I warned you of an impending rotation out from high beta stocks into low. I even elucidated my thinking by showing you my portfolio yesterday, something I used to do regularly here back in the day but now is reserved only for the confines of Stocklabs. At any rate, I think it’s fair to say this rotation is not only underway, but in full force and ceremony.

Although tempting to fish into the polluted water where you transcribe your days, I endeavor to survive the fires and beyond and buy cheaply, whenever possible. If you believe Israel’s attack on Iran last night was the final salvo in this endless war, wait until what’s next.  Whether you are a bull or a bear I think everyone can acknowledge that things aren’t exactly right and there are fissures and cracks in the edifice, which may of course give way and cause a real capitulatory collapse. This drip drop decline isn’t really injurious to professional managers. Wait until VIX is at 50 and they’re screaming from the rooftops for Powell to save them.

We aren’t there yet.

In summary, I am long consumer staples/olde man stocks.

The manner in which this decline occurred caught me off guard. I can show you why, visually, and from that make deductions.

See how the blue moving average kept climbing higher? The cause of that is the bull tape. We were barely trading lower and the mean reversion metrics inside Stocklabs got extremely tight. There wasn’t slow deterioration in the tape. The sell off occurred rapidly and without warning. You can see now how that moving average is diving lower, attempting to adjust to current conditions. The aggregate score of 1.52 isn’t even remotely close to historical oversold levels. We’d need a score of 1.15 and lower to warrant panic. Moreover, whenever there are clusters of OS signals like that, it usually portends some great tragedy in the not too distant future.

Because of this, amongst other things, I took a severely defensive approach today and closed at sessions highs of +61bps. I will show you my holdings, since they aren’t too special.

Do you see on the far right the metric “beta”? For those of you too young or stupid to understand, it measures how a stock performs against the overall market. A beta of 1.0 will trade in line with the $SPY. A beta of 0.5 will produce returns half. This is a nuclear bomb shelter of a portfolio, a median beta of 0.31 hedged with a 12% weighted TZA, fixed with 58% cash.  If markets shoot higher tomorrow, this portfolio, although conservative, might undergo rotation and get hit. But it’s worth nothing the trend is lower and the secular stocks, like the one’s above, are absorbing panicked hedge fund manager money.

Sitting with losses of 0.66% for April, I cannot tell you I’ve managed this tape perfectly. But juxtaposed against market losses of 8%, I’m way ahead of the fucking pack.

Bulls are now presiding primary in the swamps, attempting to survive by breathing through straws. It won’t be long until the crocs seek you out and snap your legs off.

Early this morning I was like you swimming freely in the clear blue water, skin very white and clean. I was happy to see stocks trend up and I partook in the spoils, thinking “hey, this is nice.” My gains crested above 70bps and I looked at my trading, then at my long term strategic, and hated what I saw. I had rotated my strategic into commodities which were no longer working and I had some other stocks that simply were not as good as the one’s on sale now.

And then I saw this.

See the one large red candle on the 5min? It scared me because I thought it might’ve led to a series of red candles. All wars start with a single shot, and all bear markets begin with a red candle. So I sold everything in my trading, took +49bps, and fucked off. I also raised 35% cash in my strategic, with the idea of reallocating later.

The net result?

It’s fucking over pal. Ten thousand sell orders preside over it, blotting out the sun. You might think it’s not over — but it really is. It’s also true that I get melodramatic for the sake of fucking with you and making myself laugh as I type this shit. In truth, market squalls are part and parcel of living in a big city. You like that fucking penthouse and that theater — well now you have to take this rape and bullet wound to the knee cap. Forget about tennis this summer.

My dream is as follows: COLLAPSE.

Perhaps one day, but the global economy is still strong and this sell off will end soon just like all previous sell offs. The only unique aspect to this is rates, once again climbing higher, placing a rope around the neck of the economy.

More later.

The $SMH is down 7.7% for April, continuing a pattern of weakness for the month of April. It was lower by 6+% in 2023, -14% in 2022 and down less than 1% in 2021. Going all the way back to 2000, it is extremely rare to see it down more than 10% and usually it snaps back to the upside in May.

Although April isn’t finished and past performance is not indicative of future results, I’m warming to the idea of an oversold bounce soon. My only hesitation lies in the utter collapse in the moving average of this oversold signal. We have not yet breached long dated oversolds and have just clustered a series of signals because the market quite literally got fucked to the downside in a very sudden and extreme move lower.

What I’m trying to convey is the nature of the market has changed and the tape is different, a new paradigm based off higher rates and that’s not exactly good for the economy.

Should $SMH dive lower by another 3-5%, I’m an aggressive buyer. Presently I’m very bullish on $BTC and defensive secular stocks like $GIS and $KO, due to a rotation out of risk into staples and low beta stocks.

You must take me for an idiot — one minute fully long and the next as bearish as the prospects for the Ukrainian army. I am almost always conflicted and my trading is chaotic — but the results speak for themselves: +14x since 2021. Even still, I could not manage this tape and closed down 49bps, now cemented into losses for April of -1.25%.

A somber mood has cast itself over the market, sort of like how one might imagine the funeral of Joe Biden. It’d be a shame if anything should happen to him, just like it’d be a shame if this market tumbled over and broke its fucking jaw.

I have extremely strong sentiments about the market and all of them bad. In the brief periods where I am ebullient, something is wrong with me. Perhaps I ate something delicious and it brightened my mood — or maybe I saw something on X that made me laugh for a few seconds and gave me a feeling of completion. But those moods shift quickly and I am fast reminded of the terminal illness wreaking havoc on America, by the custodians of those who rule over us. I know them to be weak and emotional, corrupt and also incompetent — spiteful. They aren’t all knowing and they aren’t planning things ahead. These are morons who happen to wield power and once it is taken away from them — we will preside in mobs akin to the Jacobins in France a long time ago.

I finished with an 18% weighted $TZA position, 12% $TLT, the rest long — mostly defensive names. I had to decide which way I wanted to go: hold high beta stocks into and thru the fires in the hopes of a bounce or remain protected, potentially forgoing a morning spike. Last year I missed out on most large rallies, but still finished the year +55%.

I am ok with missing out on a rally in order to make sure I don’t bleed out anymore. My primary goal is capital appreciation, but only under the conditions that are compatible with my comfort level and trading acumen. I do not like stepping out of my wheelhouse, which is why I am, as of now, leaning short — hoping for the very worst in the after hours session — dark times ahead and very bright fires.

I’ve felt we bottomed and would collapse about 10 times today, each time churning my account over to suit my current emotions. I have been rangebound from +50bps to down 50bps and now sit near my session lows — after diving in headlong only to quickly vacate some positions and throw on some hedges.

I am reticent to short too heavily because rates are falling, down 8bps. I am also long $TLT with 12% of assets.

I am hesitant to go all in long because the technicals are weak and everything is lower.

I have an edge with Stocklabs with a tool that rates large cap stocks in the aggregate and we are now nearing levels that could mean two things.

1. Major shift in the mechanics of the market — perhaps going from bull to bear.
2. We are approaching a pivotal mean reversion moment where stocks are going to move sharply higher.

Don’t be dissuaded by the action. It has been tough, even for a consummate shit talking professional such as myself — as I gaze into my fucking screen and bear witness to another down session.

Find solace in knowing the sun also rises and one day, perhaps soon, we’ll all be galloping, or perhaps frolicking even, across the clouds with our pet giraffe’s — enjoying the market once again and feeding off its sweet ambrosia as the structures of society crumble around us and the edifice of order turns into chaos and melee.

It was supposed to rally but now we’re heading lower again, spearheaded by Bitcoin. It looked so fanciful last night, when the futures traders clad in their fucking pajamas pranced about rigging futures higher. As soon as reality settled in and Trader Joe got to panic, we went lower.

I still have faith and have kept most of my longs. I did pare down a bit and I did just hedge a little via $TZA, but for the most part I’m with you long.

I see gold and oil and steel and commodity stocks in general are strong today. Weakness is concentrated in biotech and high beta. But tech isn’t too bad and it has me believing we might rally today. Maybe that’s what they want me to think, so I’ll step in, directly onto a fucking landmine and blow me legs clean off.

The corrupt politicians we elect are really trying their best to give our money away to other countries so they can wage war. When thinking about it, the issue most Americans have with the leadership here, if you’re being honest with yourselves, is the lack of ethics and honor in our government. We grew up under the illusion that a democratic America was ideal and just and we were strong because we were virtuous. To learn this isn’t true and to see them lie and do horrible things is one of the worst black pills for any patriotic countryman. To be virtuous and honorable you have to uphold standards consistently without exception. But we see with Ukraine and Israel and so many other cases that there are these exceptions and it also seems there is a bloodlust amongst the leadership that be unnatural and it extends into controlling and harming the very people they govern: us. So when we say “fuck them”, it’s really a reflection of our failure to stop them and this sense of helplessness leads us to say “I’d rather see Putin win than you, so fuck off.” And that’s the truth.