The Carnage

The Nasdaq is down 500 and VIX is spiking. The allure of shorting into the hole is palatable, as it always is, thinking about the specter of this farce collapsing on the weight of its own hubris. Dreams aside, we must be analytical when approaching the asset markets, so let’s look.

We have a mean reversion oversold signal today with $QQQ, accompanied by strong backtest data over the past 6 mos. What this means for normies is whenever the $QQQ reached this weakness in the technicals, it bounced.

Here is the notable carnage the past two weeks.

The technicals for the NASDAQ is abysmal, with just one silver lining, providing you’re into gap fills.

It is not easy to just ignore the technical patterns and wait around for markets to bounce. We were all having such a gay olde time (PAUSE) just a fortnight ago and now the $SMG went from euphoria to bordering on panic, with the lauded index falling into a 15% crevasse, all but ruining people who chased the top.

When looking at the intraday tape, you have to wonder how much downside is left in it. We have been deprived of 475 NASDAQ points today, with outsized losses in semis and all of the stuff that got knifed last week. I closed out my $SQQQ in the morning with the NASDAQ down around 300, thinking we might bounce. I did nothing else other than book the gains, up 22bps at the time, only to be beset by further downside action and bear witness to my gains dissipate into losses, now off by 41bps.

Am I to hedge now?

I’d say that would be a scurrilous proposition. We have SEVERE selling in tech, but a rather mundane tape otherwise. At the crux of the weakness are shares of $TSLA off by 11% post earnings. But the selling is not only in $TSLA but all of the FANG stocks, big tech incumbents which flourished under Biden. It should be noted, in spite of all of the LIBSHITS jerking off to Kamala Harris, we have UPSIDE in Trump areas of the market, namely regional banks $KRE, trucking and oil and gas.

I think what markets are trying to tell us, in spite of what the media is saying, is that Harris doesn’t stand a chance against the Orange Hitler.

The one thing I’ve learned about trading stock is that my opinions had value and I’m more right than wrong. Perhaps it’s instinct or learned ability.But I also have learned the hard way that sometimes my ideas and perceptions about the market are completely wrong. You have to be mature enough to accept the idea that maybe, just maybe, you could be wrong.

To be truly good you must deploy recursive third tier thinking, akin to watching MSNBC at times for political advice. You might not want to accept certain realities; but often times that manifest themselves when least expected.

What do I mean by this?

Today I was emphatically long, 120% leveraged with only bullish positions and then they flopped into the close, as markets meandered slowly lower in apathetic trade. I was faced with a decision: stubbornly hold onto the longs “hoping” markets went up tomorrow or selling them because my original stratagem failed and the impetus to be leveraged long passed.

I ended up selling them and applying a 16% hedge via $SQQQ just in case the rout in the semis picks up steam in the morning. We have recently enjoyed a respite in the semis and although they look much better than at the end of last week, it’s entirely possible for this small pullback to blossom into something more terrifying.

Down 40bps for the session.

I’d like to lay out a future for you, in regards to Spotify.

They sell a product that people want and search for. They possess agreements with all major record labels and have become intertwined with American culture, no less than Apple or Netflix. The only difference is, Spotify is valued at just $65b or 4x sales.

They are the dominant streaming service in the world.

The business model is as follows:

Lure people into a free plan beset by ads and cajole them to upgrade for an affordable premium. At the present they have 626 million users, of which 240 million are premium. They added 7 million new premiums for the quarter and have increased average revenue per user (ARPU) by 8% the past quarter. Going forward, they intend to offer a higher fidelity version of the software to make you annoying audiophiles SHUT THE FUCK UP. This is an easy vertical, which will likely be an additional $5 per month.

Quarterly revenues stand at around $4b. If they convert just 10% of users to higher tier plan, that would bring in another ~$365m per quarter, just for starters, or 7% jump in annual sales. This doesn’t include all of the other potential verticals, such as live concerts, podcasts, ticket sales, etc.

This is not investment advice; but I’ll never sell $SPOT.

Sort of a slow tape, but maybe because I didn’t trade till the afternoon. As stated previously, I am getting back into practice managing money in a more methodical longer term manner, which eliminates the rapid fire trading I had done for the past 4 years in exchange for calmness and normalcy, using 20% of assets to trade around core positions. I am doing this for several reasons, chiefly to accustom myself for professional money management again. As some of you know, I had retired from the industry 7 years ago.

One thing of note today, aside from the disappearing act Biden pulled on the country post quitting, is that Trump said neither Dimon or Fink had been considered for Treasury. More fake news, if you will. It’s also worth belaboring the point that Biden quit the race on unofficial stationary without even addressing the nation. The last time a President quit a race was Johnson, and he made a televised address to the nation to explain his actions. This sort of shit is why most Americans hate politics and loathe both sides of the aisle. I know some of you libshits are braindead and would do just about anything the government or the CIA asked of you; but at the end of the day, what the fuck are they really doing for you? Is your healthcare or college tuition affordable? How is the housing? How is the money being spent, nice big fancy infrastructure and high speed rail and innovative technologies intertwined with day to day life or more of the same incompetence with all of the investments being made outside the country for the benefit of a select few who profit off the death of others?

I have just about zero faith in the political process and really do believe you’d have to be a naive childish moron to remain beholden to a political party in the year of our Lord 2024. They don’t give a fuck about you. Go see to your families.

As for markets, I am about flat today, with a big gainer in $SPOT. I will try to scalp a little here and there to the close; but it isn’t a great tape for me, since gains are concentrated in regional banks, biotech, and SAAS. I have a portfolio full compliments and do not have concentration in any particular area and do not possess any hedges, since I feel we trade up. But there is a laziness to what I am seeing and it might be wise to take some off the table or at a minimum consider hedges. When you look at the market and do not see anything you like, more often than not that’s because it isn’t that great.

We are heading into a sweet spot for Pax Americana again. As much as it behooves me to admit it, there are various things on the horizon that will boost stocks higher.

1. Trump victory
2. Ukraine peace accord
3. Lower taxes
4. Lower interest rates

None of these things will affect the longer term issues, which is at its core the collapse of median IQ. Many will point to different stats and reasons why America is on the decline; but at it’s core is the level of competence and ability to maintain complex systems. If we only took in Brahmin Indians and Chinese aristocrats, the whites might be fucked but America would continue to function as a viable and competitive society. But alas that’s not what the fuck is happening here and if you peer into areas of the country, such as SOUTH FLORIDA, you will find a 1:1 correlation with crime/depravity and IQ.

SIRS

With Joe gone, I expect Trump to beat Kamala even more easily, as she is not a formidable person and can be considered to be amongst certain quartiles of the nation, retarded. HOWEVER, since the deep state was willing to blow out Trump’s brains onto his fans at a live event, I would not put it past them to steal another election. As you know, elections aren’t real, just like the lunar landing and various other things you believed like a childish fool.

Here are your Trump plays.

The only reason I entered Monday without a hedge was because the mean reversion algos for $SMH inside Stocklabs flagged oversold. The only other time this algo flagged OS this year was 4/19/24, with the $SMH at $199. Over the next week it soared to $218 before pulling back.

How does it work and why does it matter?

It matters because the fight between fear and greed is evergreen. The patterns in behavior we see today were the same 100 years ago. Hence if you could encapsulate those emotions via a technical reading crossed against some effective backtesting, you can quite literally predict the future. Like all things, nothing is full proof and paradigm shifts often negate mean reversion algos. However, for the most part, risk is akin to a rubber band being pulled back to its maximum potential before being let go and the object inside of it propelled forward with violence ($SMH is +3% today) or it snaps and prices collapses, like we saw during COVID.

The lesson in this is price action tends to be predictable up until the point when something changes, materially, such as a war (2022) or financial crisis (2008).

Whether you want to believe it or not, markets are pricing in a potential KAMALA HARRIS win today, or at a minimum a strong democratic showing, with solar, cannabis and tech stocks flying high. It could also be a matter of mean reversion, certain areas of the market that were beaten down bouncing in an accommodative tape. But I suspect the market is attempting to leave open all possible outcomes and realizes that Kamala needs to choose a VP and whilst that process is underway there will be media attention for the left and all of the bells and whistle of government will be working to defeat Trump. After all, they tried to blow his fucking brains out; why wouldn’t they steal another election?

The Russell is underperforming the NASDAQ today, +37bps vs the +96bps for the QQQ. But it’s important to remember the Nasdaq is FLAT for July while the $IWM is +7.3%, quite the chasm.

As for me, my core positions are somewhat static now, as I’ve elected to reduce my trading in favor of trading around core positions with just 20% of assets. I am +65bps at the moment, very bullish.

So many of you clamored to own $NVDA and $ASML and all of the other great semiconductor stocks during the run into record highs. Over the past week the SOXX fell by a staggering 10% and now many are reticent to step in and buy the dip. This is the nature of most traders, trend followers to their core, unable to based their investments on any fundamentals due to the recent popularity of technical trading.

A look at the carnage in the semis the past week:

$ASML -17.9%
$MU -14.5%
$RMBS -12.2%
$SGH -17.3%
$ENTG -11.8%
$AMAT -14%
$LRCX -14.5%
$MKSI -12.7%
$NVDA -9%
$TSM -11.5%
$AMD -16.5%

So is everything cheap now?

That’s the median price to sales ratio for the second largest semi subsector, presently trading at a 60% premium to last year. Moreover, if the semis were to once again attain a p/s of 3.79 we’d need another 37% drop in the sector and if to attain the 2.9 average dating back to 2008, we’d need a 53% courrection from Friday’s close.

But what about AI and what about Bitcoin?

Contrary to popular belief, the growth in the semis is really isolated in $NVDA and Nvidia alone. No other major semi has enjoyed the growth that is being seen in $NVDA and they’re all just riding off its coattails at this point.

Happy Hunting!

All of you catamites who dove in at the highs last week are now swinging from your ascots. The rally that should have been was not and all of the tech bros were dispatched into the frenzy of a second Trump administration. Banks and homebuilders rallies and tech crashed through the fucking floorboards.

For the week the gay heavy NASDAQ shed 4% with 10% losses in the $SMH. The semis, which were up 10% for July, is now down by 4.5%. This is what pain looks like and if you’re heavily margined into the fires, you will be baptized.

I closed the week +175bps, even edged out gains of +22bps today, as I am a consummate professional especially during times of tumult. I will have you know that I posses no hedges into the weekend and feel that a mean reversion lift might occur on Monday.

The impetus for this is simple: although stocks are pricy there isn’t any news of the material nature to warrant further deterioration.

Have a good weekend fucked faces. If you find yourself too retarded to trade well, join Stocklabs and BEHOLD greatness.