I am +165bps for the session, not because I am bullish and like stocks, but because I am a consummate professional. My gains now crest above 40% for the year and I have been sitting at all time RECOURD highs for weeks now. I tell you these things, not to boast or to make you feel bad about your present situation, but instead to serve as a pretext for the following things I am about to say.
This rally is being spearheaded by retail, believe it or not. The assumption markets are making now is — MEH things aren’t that bad, might as well stick my cock in this here. Bear in mind, most traders are flatly doing this without protection or even thinking about the negative ramifications.
This is what we do know.
Earnings have been an abomination and Russia is winning the war in Ukraine. We are only hoping for the best here, pinning everything on the notion that inflation will taper and the Fed will swoop in to save the day.
MEANWHILE, WTI is +3.6% and natural gas encroaches on $10.
We aren’t going to paper ourselves out of this mess, not this time.
I AM NOT SUGGESTING you go out there and short now. But what I am telling you is to not be fooled and believe this is the bottom and all will be well — because it’s not going to be all well and good and we haven’t even begun to see unemployment rise.
Therefore, I remain long, but reserve the right to hedge at any moment. I do believe accounts should be hedged on just about every single session near the close and those hedges closed out before 9:40am the next day. Again, we are not naive or stupid and do not fall for the same parlour tricks that have worked before — because this time IS sort of different and the downside to the markets are in line with the expected earnings guide downs — which I estimate to be in the magnitude of 25-35%.
For now, however, we have a respite.
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