Modest Bounce — Not Giving Up on the Doom

Good day —

This morning we were entreated to a garden varietal market bounce, starring all of the usual suspects save crypto miners and biotech. Although breadth is at 67% upside, the rally is somewhat selective. Nevertheless, a rally is a rally and the banks are very happy in this environ and continue to trade up.

I haven’t given up on my shorts yet — because I have faith that all will collapse. This assumption of mine is rooted in the idea that you, the weak hobbled long, will have second and third doubts the second chinks in the armor present themselves — causing a cascade and rush out of risk and back into my inverse ETFs.

Perhaps I’ll end up wrong. It certainly wouldn’t be the first time and the idea of rallying after diving 3% to start the year isn’t exactly novel. We are supposed to rally. After all, why not? This is as far as I can go to explain the bull case logically.

But in the off-chance you do get scared into the afternoon hours, thinking about the weekend to come and your losses stacked heavily for the week, I will be here like an usher at church to collect your donations.

All sorts of things can happen: Houthis and their rockets, Russia and their missiles, Gazans and their RPGs.

For the session, I am down 43bps, which is acceptable given the fact I am +32bps for the week and didn’t succumb to the small fires that sprouted up to begin 2024.

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I’d like to point out the disastrous and ruinous rout of the semiconductor index for 2024 and then follow up with some advice to BE WARNED about chasing them down the sewer hole with shorts. This index has a proclivity of bouncing back. HOWEVER, we are barely into January and the -5.5% drubbing is somewhat profound — placing is on pace to have the worst fucking January ever for the index.

Here are instances when the $SMH plunged by more than 5% for January and then how it did in February.

January

2024 -5.5%
2022 -10.5%
2016 -6.5%
2010 -11.3%
2008 -13.2%
2005 -6.5%

February

2022 -2.8%
2016 +1.4%
2010 +6.5%
2008 +1.4%
2005 +8.9%

The first thing that stands out is the median loss is -10.5% for bad January’s. The second thing is — should be comport ourselves down another 5% from present levels on the $SMH — by God I will dip buy with both testicles and cock in tow.

Now with the fires kindling we want to encourage them to burn bright, fiercer — taking in more oxygen and tinder so that is can amass to a great fire — burning down everything in its path.

I remain steadfast and patient, +35bps short the semis, NASDAQ — hedged with longs and cash of 45%.

The US 10 year bottomed on 12/27 at 3.77% and markets haven’t gone up since. Nearly done for the first week of stocks January 2024, it’s safe to assume, barring a miraculous rally, we have flopped.

Indices are off by 3% for 2024 with many leadership names, such as $AMD, $AMAT, $BA and $AAPL fairing far worse.

Today we have a divergence between the Dow and everything else — mostly due to a risk averse tape and gains in major Pharma. I’m barely up today, +12bps, because I haven’t been aggressive in my trading — mostly because I don’t trust the tape or my assumptions.

At the present, I am 65% cash, hedged with $SQQQ — thinking about how to position into Friday.

OFF TO LUNCH.

All of the bulls pranced into 2024 naked and boastful about the year before — drinking from large goblets brimming with chardonnay. Much to their chagrin, they walked right into a trap — glasses punched into their faces — legs and arms cleaved off clean from their weak bodies.

Ladies and Gentlemen, the great doom of 2024 is here and with it comes fantastical stock market losses. Aware of this and unfooled by the transgendered bulls, I escaped the melee and gained 79bps for the day, session highs for yours truly.

There are two types of traders in this market: those who can trade in a bull market and those who can trade in all markets. You might do well in the bull — but can you stand the fires — when the heat rises to the point of combustion and emotions disconnect from reality causing people to behave irrationally?

This is what you need to understand about 2024, thus far.

High beta stocks have been castrated — largess losses of a horrific varietal can be seen in names such as Square, Affirm, Upstart and Caravana. All of the winners of 2023 have morphed, almost suddenly, into murder holes. I am of the belief that these occurrences might be cause for action, as I am not convinced it’s entirely over — at least not yet.

Into the close, I outfitted myself with a directionally bullish position — betting on the cabals power to see it through. I did take a barbell trade long SQQQ and long TNA — based on my belief that high beta small caps might surge at the open of trade tomorrow.

This is a frightful trade, betting long in the face of harrowing horrors. But this is what us bloggers get paid the BIG BUCKS for, making contrarian calls for the sake of nothing — fleeting and feeble praise by a catamite class of reader — hobbled easily by tradewinds and small flurries.

At some point in 2024, I assure you the fires will burn assiduously and the foundations of Pax Americana will be cracked asunder and all will be lost. But I do not believe that to be the case now and have staked a modest sum at risk for this excursion.

All trades are executed in real time inside Stocklabs.

Good day.

New year, new you. Gone are the days of being harassed by markets, tricked and fooled into folly. Your adventures inside of the labyrinth of the market is over. To achieve this, just stop behaving like yourself and act more like me, or a person such as myself.

I glance over at this market today and see nothing but traps. The US 10yr yield is now lower, which is good. Oil is soaring +3%. Have you tried chasing oil stocks the past year? Ordinary stocks of high beta value are CRUSHED lower by 3%. Cryptos are hammered and all appears to be lost.

Or is it?

If the logic was “stocks are under pressure when rates are higher” then stocks should rally when rates come back down. No?

This is most likely a buying opportunity. I am not bullishly retarded and do not prostrate myself at the feet of the transgendered bull. But we have seen this complete bullshit many times before with the bulls rope a doping, pretending to be weak but only yo later on knock out the bears and all of their teeth with one great magnanimous blow.

We shouldn’t panic yet but these losses to start off 2024 isn’t helping confidence. The crux of the weakness stems from the spike in rates, now sporting a 10YR yield of 4%. On top of that, cryptos are being whipped at the gibbet based off yet another Bitcoin ETF denial rumor — and high beta risk on stocks are off by 3%. I know this because I have a High Beta index inside Stocklabs.

I was positioned in risk averse stocks and TZA-UVIX-LABD and therefore stand before you +59bps. I am a professional of the highest order and now tell you “go to cash” — at least until the fog clears.

It’s true that if we are truly in a bull market, this represents a great buying opportunity. But what if, by chance, the crimson tapes deepens in its ferocity — routing the catamite class investor back into their hovels? This is something to consider and I think about these things often.

At any rate, I see no reason to rush anything — 100% cash in my trading until the voices inside of my head encourage me to do something.

I had traded masterfully until the last 15 mins of trade, when markets — out of the fucking blue — melted the fuck higher, escaping the wrath of a down 300 NASDAQ session.

It makes no difference to me, as I traded off by just 36bps for the session when most of my colleagues clung to their holy books today, off by more than 150bps. There was a very noticeable rotation out of risk and back into value. I cannot stress to you how many times I’ve been fooled by this rotation — as I am biased towards believing in the circular motion of money out from growth and into value and back into growth as markets cycle through economic ups and downs.

It is my belief we are at the precipice of economic collapse. But it should be noted, I’ve been believing in this since 2009. Nevertheless, a man is nothing without his dreams and I tend to get carried away with my machinations — creating hellscapes out of bull markets and apocalyptic doom forged at record highs.

It’s going to be a long year and we’ll have plenty of time to make great trades. One potential great trade is the ANTI DEFLATION varietal, as consensus opinion now states flatly “inflation has been defeated”, giving an all in signal to bond longs to keep leveraging in and buying since the FOMC is going to cleave rates by a hundred times in 2024.

But what if none of that shit happened and rates jimmied back to 5%? We had the US 10yr +8bps today for no reason at all. Dare I say, you’d be foolish to lean into stocks heavily today, providing all of the news regarding Apple’s downgrade and the fanciful stocks you and your homosexual friends traded so eagerly in 2023 tanking through the fucking floorboards and beyond. It’s very possible, the January Effect in 2024 will be a deleterious one — given the circumstances and candor of the tape.

I closed long risk averse names, hedged short small caps, biotechs and long volatility.

I like to make ANNOUNCEMENTS in all caps titles to provide people with information no one gives a fuck about. But since you’re reading me and not the other way around — you’ll just have to deal with it.

Effective today, my position sizes will be increasing from 5 to 6%. I know what you’re thinking “whoa — so reckless — how are you!” But you’ll need to fuck off with those opinions and find solace in knowing I analyzed this decisions for days and went over the data and have all of the documents necessary to support such a brazen and bold course of action.

The fact of the matter is, I am right more often than wrong. Ergo, by increasing my position sizes without demonstrably altering the dynamic of my trading rhythm, I shall henceforth make more money in trading. It goes without saying, all else being equal — I expect to increase my gains in 2024 by 20-25% with a target of +75% or +6.25% per mo.

As for markets today: we are beholden to the interest rate narrative and nothing else really matters. There are times when the economy is front and center or perhaps geopolitical events or even obtuse events such as short squeezes and/or liquidity events. But none of that shit means anything right now. Look at the US 10yr. Determine its direction; and trade accordingly.

Barclays downgraded Apple this morning, sending all of the mega caps down 2%. Whilst at the same time the small caps are marginally higher. We are seeing very strong action in the crypto miners thanks to the holiday run higher in cryptos and we have early strength in oils, tankers,risk averse and biotechs.

It’s a confusing tape, with decent breadth and many cross currents, such as the US 10YR +6bps. I went to cash, +9bps early going.

The first week of January is the most important week of the trading year. The tone will be set early and the January effect never ceases to fascinate me.

I’ll tread carefully until I see a fat pitch.

Geopolitically, risk is very high. We had been trending higher the past two months thanks wholly on new FOMC schemes and the collapse in rates. Do not believe for a second markets can continue to trade up with rates also ticking up.

The Nasdaq is -233 and the Russell is now following it lower, -0.33%.

It’s over fucked faces.