Is it Baked In?

Oddly enough, the very thing that I try to avoid (earnings) is what I am hoping might put a bid under this market.

Typically if a stock get crushed prior to earnings, that crushing blow is already “baked” into the numbers. The stock rallies and a vicious short squeeze ensues. In rare times, a stock gets crushed into earnings and the earnings confirm what people feared most: a horrible decline in profits. This leads to a final rout in the shares, something that will leave longs scarred for the rest of their lives.

Give the recent “pullback” in stocks like FEYE, down 47% over the past month on no news, one might surmise this company is on the verge of a catastrophic earnings miss. Should they beat estimates, one might also surmise that the stock is going to get a “full erection” post earnings and commence to offer “surprise sex” to all of those who are short.

What if they miss?

With the stock halved from its highs, it’s entirely possible that the stock might rally under any circumstances. It all depends on the mood, quite frankly. Will risk appetite come back? Will America’s $55 trillion in personal net worth be put to work or will funds suffer redemptions?

During many market panics, share prices got compressed to ridiculous levels, most of which resulted in tremendous buying opportunities. The key, as always, is to stay in the game.

Having said that, let’s take a look at the earnings calendar and see if we can glean into their upcoming reports and determine whether or not earnings shortfalls are “baked in.”

CRTO: major player in online advertising, second to Google’s Adsense, is the first of the recently destroyed stocks to report on 4/14. I believe the fate of the high growth stocks is going to be greatly affected by how the stock responds post earnings.

After CRTO, here are some other stocks to watch, one’s that are scheduled to report early in the reporting season (listed in chronological order).

ATHN

AMZN

ANGI

AWAY

LL

N

NFLX

TWTR

WETF

WYNN

BIDU

CREE

The billion dollar question is this: If CRTO misses estimates, will the stock get crushed again, or is it down enough to warrant dip buyers to step in? My guess is it has all to do with guidance and if the guidance isn’t apocalyptic, these stocks will be bought, regardless of what the numbers say.

Something doesn’t feel right about losing all of this money. I can’t put my finger on it. Rumors of hedge fund blow ups. The media is crapping on “momentum stocks” when in fact they are growth stocks. I was told a long time ago to buy when there is blood in the streets. When everyone is running one way, go the other. This has to cessate and we must bounce. Even in the worst of markets, you get a bounce. I have one more slither of cash left reserved for averaging down and I have no choice but to save it for Monday.

I’d like to buy now. Then again, why should I since everything might crumble to pieces on Monday?

In all of the years that I’ve been in this business, I’ve NEVER seen the IPO whorehouses, assisted by the vulture capitalist houses, be so blatant in their disregard for the investor. To hell with GRUBHUB and all of these S-1s that are being filed. How the hell can you justify bringing a tech company public in the midst of an epic rout in tech stocks? It’s borderline criminal, at a minimum morally corrupt.

Have a look at how many IPOs are on deck to be priced. It’s amazing.

Anyway, keeping with the standards of iBC, all tabbed bloggers will be catering to you this weekend, with ChessnWine doing a special video overview Saturday or Sunday. Additionally, I might allow for free passage to all premium services, After Hours with Option Addict, The PPT and 12631, on Monday and Tuesday. We will get through this, one way or another. We always do.

Right now I am trying to put together a list of hedge funds who are getting smoked. I might post something about that this weekend.

Since everyone is talking about it, comparing this environment to that of 2000, I though it’d be useful to actually see how the dot com bubble progressed in a stock that embodied the good and the bad of that era, a relic from the past: SCMR.

The market topped in March of 2000 (eery) and the losses mounted good and fast.

Here is the price action from March on.

March 6th, 2000: $170 (looks sweet, new highs)
March 27th: $120 (buy the dip?)
April 3rd: $78.5 (got to buy it now, yes?)
April 10th: $48.94 (this is just ridiculous)
April 17th: $64.56 (that’s better)
April 24th: $78.50 (the bull is back)
May 1st: $86 (kill the bears)
May 30th: $90 (get some)
June 17th: $138 (c’mon, son)
August 14th: $167.19 (buying a new house and lambo, cuz I bought the dip)
August 30th: $142 (no biggie. A little profit taking)
Sept 11: $105 (was that a double top?)
Sept 18th: $117 (here we go again. Back to new highs?)
Sept 25th: $105 (maybe not)
Oct 2nd: $78 (that was a double top)
Oct 16th: $85 (we’re bouncing here)
Nov 6th: $59 (maybe we’ll retest the lows then bounce. Crazy tape)
Dec 4th: $64 (holding steady. I like the consolidation)
Dec 18th: $35 (taking out new lows, the bottom dropped out)
Jan 2nd, 2001: $33 (new year, fresh start)
Jan 16th: $50 (atta boy)
Jan 29th: $29 (more of the same. This market sucks)
Feb 20th: $20 (where is this thing going, zero?)
March 5th: $14 (wow, what a value!)
March 26th: $10 (I can’t believe this stock was $170 last year)
April 2nd: $7 (ruinous. That was the bubble)

If you go through each price point, you can see how it’s easy to get caught up in a bubble and not even know it’s happening. Hope mixed with the surreal, combined with greed, makes for a dangerous combo.

I should’ve heeded the warning of the great polar bear who kept eating me in my nightmares. That feeling of “impending doom” has turned into a reality, as I stare, almost helplessly, at a screen that defies reasoning.

There aren’t any bids in the NASDAQ right now. None.

From AMZN on down, this is a rout and I have no idea when the selling will pause.

Over the past month, the “best stocks” of 2013 have been taken out to the woodshed and executed. There isn’t a better way to describe it. You are looking at how a bubble looks when it pops. The constant selling, the sheer spectacle of the unknown coupled with the unbelievable causes people to freeze up and just watch.

It’s bid less, no hope. Hedge funds, without a doubt, are being liquidated over this secret crash. Over the weekend I will do some digging into who is being hurt the most and try to deduce what stocks might come under further pressure due to forced liquidation.

I envy the day traders, the degenerates who get flat every day, only interested in making enough money to pay the rent. I am losing a fortune here and I truly do hate my job, more than anything else.

This carnage was too much for “The Fly” to bear. Therefore, he had no choice, whatsoever, than to break the glass in which this fine African Tribal mask was hidden, for the purposes of wearing it while trading.

I repeat: THE AFRICAN MASK MODE HAS BEEN INITIATED. The last time this happened, heinous things happened to short sellers.

Off to consult with my Voodoo physician.

The futures guys were wrong. The market has quickly given up all of its opening gains and is now taking on water. It’s probably not a good idea to believe in miracles, upside reversals when there are so many people crushed by the downside action in widely held stocks.

YELP, FEYE, SPLK and WDAY are being sold every which way but loose. It just feels like one gigantic unwind, detached from fundamentals, a matter of necessity if anything at all.

This is a very diseased and sick tape, despite the broader indices clinging onto new highs. That makes this clandestine drop even worse, the hidden secret under everyone’s noses is that things are not going swimmingly and it’s important that high growth stocks perform in a healthy market.

Unreal carnage. Let’s see if we can get a final flush out.

Futures are ripping higher because the economy only added 192k jobs for the month. The sages who bought up futures have deduced, in their infinite wisdom, that a weaker economy means The Fed will keep pressing on the QE pedal. I contend, in no uncertain terms, rates will NEVER go higher again–because the government has to service $20 trillion in debt. The only way rates are going higher is when we start paying down the debt.

Any guesses as to when that might happen?

WDAY caught two bullish notes this morning, one by FBR and another by Oppy. In summary, the analysts both said you people were retarded retards for selling WDAY, since their pimp hand is super strong and their game with the ladies is unmatched.

I don’t want to count any chickens before they’re hatched. I think a lot of sellers got flushed yesterday; but one can never be too sure. Whoever sold short beaten down growth names yesterday has to be feeling a little uneasy today. Of course they won’t feel the pain until these stocks base out and start climbing again. That could take a long time.

My best guess: growth stocks make a considerable comeback one week before their earnings are set to report. Who the hell wants to be short WDAY, with the stock down $30, in what appears to be another knockout quarter? The risk reward simply isn’t there for aggressive bears.

Well I’m not bored anymore. I was complaining about the lack of challenge in the markets. It was too easy and I wasn’t interested in the ordinary. Now I have my hands filled with some good olde fashioned BIG ASS LOSSES. I have stock market experts offering me financial advice in the comments, as well on Twitter. This is exactly the sort of thing that I relish, sans the specter of having a disastrous ending.

I’ve always managed to come out from every catastrophe unscathed. Naturally since they occurred in the past, some of the newer readers aren’t familiar with my pedigree and therefore default to thinking “this guy is doomed.”

Young Prince, I am far from doomed. I can buy Splunk down to $2 per share. I have what they call “staying power” backed by what one might call “real money” and it isn’t going away. Either way, the people of this site, the reader, will come out a winner, by watching me navigate the impossible or a front seat vantage point at a blow up, a guide of sorts through tough sledding.

I’ve already made my bed, pal. There isn’t anything left to do. The wheels are already in motion– and my machinery is heading downhill with the momentum of 20,000 maglev trains. I have some cash to put to work and have made it my business to trade out of these homosexual positions unscathed, without being raped by them.

During panics it’s important to expect the impossible. Stocks behave crazy because crazy things are happening to the people who own them. The snap back, whenever it occurs, is going to be violent. All of the panic selling will cease, pause, then a buying frenzy will ensue.

Any questions regarding the market should be forwarded to “Honest Abe”, as he is now your go to guy for stock market commentary and opinion.

Off to Romania.

UPDATE: While at the airport, on my way to Romania, I averaged down in WDAY, YELP, SPLK and FEYE.

I see my bad fortune has brought out the most fashionable folks to comment on my blogs. I am deeply humbled and grateful to see your commentary. One might say, I am undeserving of your grace.

I wasn’t being sarcastic when I said “I’m done.” I had a feeling these stocks that I happen to own would drop off the table again. It’s the exact opposite of a short squeeze. You know when a stock is running and it has a big short position? You know how that helps to fuel further upside? Well, when a stock is careening lower, it takes out all of the guys who bought it on margin first. After those guys are finished, it starts to take out the traders and then finally the believers. I went through this process in a number of stocks, most recently in WNR.

Any of you remember when I averaged down in WNR at $11 from $17? Eleven was the absolute bottom and after that last round of selling was done, the stock never looked back.

This is a little different, only because the underpinnings are a bit more liberal. Valuations are still high, even after a 30-40% drop. People are referring to these names, the very names I happen to own, as the centre of what they deem to be a bubble. Bubbles stocks aren’t treated with decorum on the way down.

All jokes aside, I have two choices in front of me.

1. Keep the faith and hope to baby jesus that these stocks find support.

2. Book the massive losses and hope to think of a way to make it back elsewhere.

The primary reason why we hold onto our losers is the fear that we will miss the upswing. We feel the stock has eyeballs and is waiting for us to sell in order to bottom out and scream higher. After we sell, all of the hopes and dreams we had for the stock will come true and we will never forgive ourselves for not seeing it through.

Naturally, this is fatalistic thinking and is never a reasonable approach to managing money. A line in the sand must be drawn because the future is always a mystery. We can make educated guesses about it; but it’s never assured.

So this is my final stand. I can afford to absorb a little more, with nothing more than idle hopes of seeing them bottom out soon. I know this is a futile endeavor because carnage begets more carnage and there isn’t any reason to hold onto broken stocks, unless of course there is a short term catalyst.