Before we make predictions, let’s review.
Stocks are down 15% over the past 3 months.
Gold is +3.15%
Oil is +10%
$BTC is +15%
$TLT is -15%
$STNG is +33%
$TZA is +68%
Are we clear with the present trends? Sometimes we lose focus and fight old battles whilst not adapting to the current conditions. The salient we are in now is higher rates, lower stocks spearheaded by small caps, higher oil, higher tanker rates, higher gold and Bitcoin due to capital flight and desire for safe havens.
The simple fact of the matter is, there are only a few areas of the market that have worked since July and to believe this new trend is going to change is merely guesswork. The most likely course is the one we’re currently navigating.
The geopolitical situation is at the most severe and dangerous point in many generations — and that’s not hyperbole. We are fighting a full proxy war against Russia in Ukraine, a new front has opened in Israel, and China looms in a not too distant corner with alleged designs on Taiwan. These wars could’ve all been avoided. Anyone paying attention sees the incompetence of diplomats from the west and their craven desire to establish a “rules based order.” We will all pay for their sins.
Meanwhile, markets continue to price in uncertainty and constriction of money supply caused by spiraling higher rates.
For the session, The Fly closed at session highs of +43bps, in flawless trading — long volatility, short small caps, long FANG stocks, long oil, long gold, long tankers and long defense stocks with a 50% cash position. My intention is to wade into the next flush out with considerable weight to the long side. We are fast approaching a mean reversion ebbing point that will lead to a ferocious upside rally. This is an important reality in all bear markets and if you’re not nimble with your positions — you’ll get hammered short into a 1,000 point NASDAQ rally.
For the week ahead, I foresee a cataclysmic decline followed by a sharp upside reversal. The NASDAQ has been HIGHER in 15 of the past 16 Mondays, an unusually repetitious trend that is crying aloud to be faded — trapping foolish bulls into yet another trap to be beaten upon the rack until all of their bones are crushed into dust and their heads concaved by rampaging bears.
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