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?
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.
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