There is Currently No Basis For a Market Crash

This racks me with idle thoughts at night, the epheremal notions persists in the back of my mind that all of this excess is not a byproduct of wealth and industry but grift and malfeasance. The new $3.5 trillion BIDEN BUDGET is more evidence of this — the absurd coming true and normalized to condition a new generation of ignorants to accept corruption.

When looking at money printing I am reminded of Einstein’s law of relativity. Whether Einstein was right or not, the idea of being on a train moving fast and an adjacent train traveling just as fast equating to no real movement is important to remember when looking at money printing. The whole world is doing it, not just us. So how could there be a bubble when the rubber balloon is also getting bigger at the same time? It defies physics, granted, and it’s magical thinking to assume we can get away with it. But show me where the pressure is being applied?

Below is the LSTA index for leveraged loans — aka the shittiest loans on the planet. If the market was really worried about credit, you’d see these bonds hit first.

High yield is having a grande old time and no one is scared and nothing is on the horizon, aside from +30% YOY real estate gains and crippled supply chain that threatens to freeze all of Europe this winter. The idea that COVID is over because we’re seeing less COVID cases, but still +200% YOY, is also naive — ahead of winter. There are reasons to be terminally worried about stocks, such as the idea that we’re +40% since Biden got elected. One might muse at that and feel it’s wrong and shouldn’t be and care to revoke said gains, all the way to zero.

More magical thinking.

For now, I’ll leave the longer term forecasting to those who get paid to do it. We can have a dreadful market without calamity, just a drill down into dust due to confidence destruction. We are close to that now. We are one or two big down days away from manifesting a rout in stocks and no one will know why it happened. Confidence is everything and without it the house of cards can collapse on its own, without a reason and without warning. These are the hardest events to predict — because without a fundamental concern people are inclined to hold and add to stocks when they drop. Most people view them as long term instruments and are programmed for reward when holding long enough. Last year at the COVID lows people were down 60% in their portfolios and it came all the way back and much much more.

That is not supposed to happen but it did and we pretend it’s ok because “clown world.”

The market traveled a familiar path today, FUCKING all of those who bought the open and then FUCKED them once more into the final half hour of trade. That’s what we do — fuck the open and the close and once more at night before bed to give you nightmares.

I bought a FUCKLOAD of semis and an array of high priced stocks — because I am betting on higher prices. I don’t even care if I draw down. As a matter of fact, I want more losses. Speaking of losses, I erased my losing streak and gained 1% for the session — which was down 55bps from my highs but who’s counting?

All of these little penny stocks can fuck off. I am done trying to capture their 100% intra-gay moves. All month long I was trying to catch one and they fucked me every single time. For October and going forward, I am going to trade less and more methodical — adhere better to the markets. Get back to basics and bowl on people for sport.

I know you want the market to trade lower and I would want it too if not long. How about you permit me to sell the opening rip and then we can possibly short it together?

Rationale for the long position: there is no crisis to justify these poor technicals.

Either way, I’ll be here to face the music come Monday.

This is predictable. I sold every god damned stock but one at the open, locking in a 100bps gain and have since NIBBLED because I am now a rat in this market — running around fast taking bites of cheese. If you’re instincts suggest the opens are fucked — you are right. Check out the 9-11pm data on QQQ since August.

Fade the opens; buy after 10am and sell again by 1pm — for 3pm looms and it looms large and Monday we’re gonna die.

I shed 10% for September, marking my first negative monthly return since October 2020. The Nasdaq lost 4.5% for the month and most stocks did poorly, with exception to very small capped pumps — which were a massive distraction for me all month long.

On one hand my positions are mired in mud. On the other, all of these penny stocks are ripping 100% per day. The fact that I didn’t catch any for an entire month is quite rare and also sad and fat.

I am and have been a HORRIBLE TRADER all month, which is why today I took a stand and decided to Martingale my positions down all the way to zero. It’s very easy to buy and hold. Even idiots can make money that way. I might as well try it.

Yes, I am still up 180% and yes I am still up a tremendous amount in my ETH position. But my spirit is almost broken. I am a shattered man, a skeleton of a once very proud and massively successful man. I now spend my days drifting into the unknown, both oblique and horrendous, cavorting with strangers in the Pelican Room for fun chin-wagging and adventure.

I hate this market and all of its little manifestations, the morning sell offs and the mid-afternoon pumps followed by the late afternoon crashes. I hate the oils and I hate the crypto miners and I hate the shippers and I hate all of the biotechs, especially the fucking COVID plays, and I also hate the semiconductors and the Chinese burritos and all of the old man stocks and also the natural gas plays and most definitely the banks and the homebuilders. I hate all of the ETfs, both upside and downside, and I fucking hate the brokerages, all of them — each and every single one of them.

More than 50% of stocks are down 20% or more from the top. The tera-caps have infected the indices so greatly, you can no longer see what the market, the real market, is doing. Then again, in this environment of crony-capitalism — why buy anything but tera-caps?

I ask myself this question often and I continuously chide myself for chasing momo stocks. I’ve had a reprehensible month and I am being chopped up like a scallion on a Guy Fieri chopping block. I keep thinking I know what to do — and then I do the wrong thing and start again. Small respites are met with rancid drawdowns, in the midst of the most incoherent economic environment in a long time. We are now harangued by supply chain issues, all the while a COVID lockdown and apparent fantastic economy — full employment lest you are unvaccinated.

This morning’s gap up was immediately met with unrelentless selling and we’re still in it. I bought at the open because I had cash. I bought because I wanted the market to go up. I want the market to go up because I want to increase my account value, and yet the opposite has occurred since then.

Now I am betwixt a cross road of stubbornness and malleability. Do I cut losses and wait and start again, risking getting bogged again — buying in higher and raped lower? Or, do I simply lay down in the bed I’ve made and trim gently when needed? The risk to that stratagem is wholesale collapse — which can occur during periods of oversold. We are quite oversold and the market feels on edge like it wants to do something terrible.

I am leaning towards the stubborn camp, especially this early in the day because nothing says “fuck you” like holding stocks knifing lower. I’ll show them.

You’re believing in a farce. The Dow was up 145, Nasdaq +10 but stocks got fucking hammered into dust. Observe.

Those indices inside Stocklabs are not weighted and they’re broken down by market cap. As you can see, only stocks with market caps of $100b+ did well today. On the whole, the Sl4000 index was down 0.6%. Even worse was the intra-day trap behavior, investors being lured into luxury cars only to be trapped and burned alive.

Observe.

Look at that shit, the % off session highs. You bought into a rally and you sold soon after -5%. This transpired all day long and it will continue to transpire until the last bull is shot dead in the head. We are trending lower in technical score since February, meaning the strength of the market as a whole, regardless of what the Dow is doing, is poor. One might suggest this is a bear market. One is not ready to suggest it so far and I am not the one to declare doom ahead of National Festival Day — but Halloween looms and soon scary pumpkins will be outside American homes and teenagers tossing eggs at one another — shaving creaming their faces until nothing is left. This is not a market to take it easy in and I find myself stressed the fuck out, especially when bearing witness to trades going poorly and set ups failing. The methods that worked before aren’t anymore — big moves in Chamath styled idiot SPACs have been supplanted by Zach Morris styled idiot runs in CEI and others. The game is the same, but the funnel is narrower and more obtuse — led by fucked faces in thinly traded stocks, pump and dump runs and there’s nothing wrong with it. I am just not catching them.

My gains are vacillating between 0.5% and 1%, trading fast and making me nervous. I end up positioning into 10 stocks at a clip and selling 6 of them inside of an hour. The market is bouncing today but it seems volatile and it feels heavy. I am not bold enough to sell it short — especially not on a Stocklabs oversold flag. But if I was to sell short, I would bet against the semis.

I ripped out all of my positions at 9:30 sharp and good thing I did because it was all wrong. I escaped at breakeven and then started my day with a clean slate and big enough balls to trade retarded stocks.

Most of the gains are in mega cap today, with tera caps +0.6%. But the small caps are flat to down and I am sure you see plenty of small ones running — because there is an appetite of risk in the air. However, on the whole, this is NOT a very good tape. Again, the gains are found in short squeezes and social media led retarded plays, like CEI. If you’re trying to invest in small capped growth based on revenues and prospects — good luck with that. This is a ripper market, in for 5% and then out.

As we enter the mid-day hours things will subside but I am certain we’ll see some meaningless moves this afternoon.

I sense we spill lower at the open. I mismanaged my book after 3pm and gave back half my gains, finishing up 1% — a solid day overall. I was confused as to whether to go naked long or hedged and I ended up with a 2x TZA position to hedge against my oils.

Best case: small caps rummage lower in the morning but oil is up.

Worst case: oils knife lower and market gaps higher.

For whatever happens, I am 55% cash and will be watching the open closely. If you’re not trading the open — you are missing out on one of the very few windows to trade fast in the entire day. From 9:30 to 10:15am there is extreme volatility and then we settle in. If you’re done 2% by 10:30am, odds are you’ll be down all day and vice versa.

The market is sick and seasonally prone to large declines. The Evergrande business was just an excuse to bid lower, since now the market is sooo worried about energy prices, inflation, and higher rates.

This too is transitory.

I believe a little of both will do. The semis are right on the edge of COLLAPSE and should bounce here, else they’re fucked. One has to imagine these supply chain issues getting in the way of business at some point. When do we begin to price this shit in?

I have been insulated from the carnage, mostly in cash — sitting in the tall grass waiting for a zebra to devour. I am inclined to sell short into the hole — only because I like to do it. However, even if we close miserably, we are likely to bounce tomorrow, maybe at the open and then collapse.

Important to note: remember to sell opening rips and trade with tight stops throughout the day. The reason why I am down 7% for September is because I let some positions marinate for a few hours — very few but larger trades constituted the bulk of my losses.

Right now I am 21 for my last 22 trades, so perhaps the spell has ended and I am back to trading great again.

Whether I will short into the hole or buy more wholly depends on how I close the day. If with a big cushion — maybe I go for it long. If marginally higher by less than 2%, I will likely hedge my longs with a short against tech. Worst case scenario would be tech bounces tomorrow and oils trade off. It can happen, so I have to think about that too.

The pressures of runaway inflation is causing the 10yr to spike through the roof, now up 7bps to 1.56%. This is NOT a big deal until it hits 2%. Natty was up 10% and now selling off hard, alongside many oil/natty stocks. I sold out of most my oils and SOXS hedge this morning and am up 90bps as we speak. The overall tone of the market is terrible, and I don’t like it, but I cannot short into the hole with the NASDAQ off nearly 300.

Can we bounce?

Maybe.

The point is, cash is king and there isn’t a reason to play every move. The smart move might be to take small nibbles and trades throughout the day and position into the close for tomorrow.

The fear now is inflation, energy crisis, and a COVID winter. In my opinion, none of these are real reasons for a market calamity. Nevertheless, ‘tis the season for marker corrections and September always brings the drama. Perhaps this blood letting is setting us up for a more predictable and industrious October.