18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
22,296 Blog Posts


My Quant was shattered for another 3% today. YTD, losses are now 2%. Granted, -2% is much better than the market. However, it’s down more than 20% from the highs. Full disclosure: I know this is a problem with the quant and part of that lies in the fact that oils have been destroyed this month. The quant was mostly all oils for June.

So what is the solution and how can the quant invest with me dead and not be destroyed?

There are two solutions.

1. Shorten the holding period from 1 mo to maybe 2 weeks. But even if I did that, losses would be enjoyed since markets were trending down.

2. Create a technical threshold whereby when it’s triggered the account automatically hedges.

On the broader topic of using Stocklabs algorithms and intelligence tools: they are not the holy grail. These tools, although more advanced than anything I’ve seen on the market, cannot duplicate human intuition…yet. As we progress with development the tools will get smarter and the accuracy improved.

When going from terrible to great in a sector, you’d have to expect the algorithms to miss this move in terms of backtesting. For example, biotechs were the worst performing sector for more than a year. Had you shorted when our algorithms said to over the past year, you’d bank… up until the point when the sector bottomed and turned higher.

The predictive elements of the system cannot tell if some stock or industry is undergoing a pattern change. However, our technical rankings can show there is strength.

Here is a chart of the technical scores for all healthcare stocks. You can clearly see Stocklabs is showing you there is a ramp.

Based on this change in mood, I went long a sundry of biotechs.


THEY ARE LITTERED WITH SHORT SELLERS and if these sector continues higher, the squeeze can and will be epic.

Bear in mind, this could also be a short lived rally and if markets dump out — I’m sure LABD will recover some of its recent losses. The point here is this — the quant is my brain but dumb. My living brain but smart is my trading, up 49% YTD, +200% in 2021 — trading live. I’m not a guru, just better than anyone that you know or will ever know during the balance of your lives.

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There’s no denying the biotechs are back in force. The gene editing stocks are leading and mostly everything else is higher by 3%+. Aside from that, SAAS is sharply higher by 5%.

What do these two industries have in common?

They were the most oversold.

Are we seeing a catalyst?

Yes. Commodities are collapsing and with it interest rates.

Rates crested near market lows and now with rates coming in, morons think the market has bottomed and inflation defeated.

The market is wrong, but I’m not one to fight mobs. I’m fully invested, hedged, looking for a continuation higher for risk assets tomorrow.

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Nothing is safe. All rallies canceled. Each morning we gap up and then collapse into the close in a clown car.

Look at the % from session highs via Stocklabs.

Admittedly, I got hooked into some growth stocks and even an oil. I’ll be forced to avg down in oil. I’m hedged so the losses are non existent, now flat for the day. It is frustrating to trade in a market like this, which is why it’s probably smartest to limit risk and resume light summer trading.

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Constructive Action in Healthcare

The worst performing sector, biotech, has done the best the past week, surging by more than 10% and standing out during upswings. For the entire year, LABU has been getting drilled up until recently.

Has it bottomed? The action is good, but only cosmic scientists can determine whether cash burning biotechs into a deep recession are good buys here.

Within the healthcare space, I prefer large capped pharma like BMRN or MRK. If you’re interested in alpha, the gene editing stocks move the quickest: NTLA, EDIT, ILMN etc.

Early going it’s all biotech and tech. Energy and ag are being rotated like a bitch, sending those stocks down deep into the red. Although cheap, I don’t like chasing stocks down the sewer. I’d prefer to buy at end of day on names like MOS.

I’m up 23bps, 30% cash, 10% SQQQ.

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The Commodity Bubble Has Popped

Admittedly, I’m too bearish. My contempt is keeping me in a constant state of hatred. Good thing my rules are such that I blow out of my positions regularly, otherwise I’d be liable to short this market and never cover. Long term shorts, hoping for the worst.

Futures are higher this morning, but commodities are once again getting drilled. You can view this two ways.

1. The Fed is successfully bringing down inflation and we are first seeing it in commodities.

2. The economic backdrop is such that supply shortages are negated by a fucking clown car collapse in demand.

The CRB index is only part of the story here.

The more significant story is the price action in the underlying stocks for commodities, ravaged in recent weeks and now FLAT to down for 2022. There are gains in the energy complex, but just about every other facet of Putin’s price hike has been neutralized.

So which is it — full economic collapse or successful victory over inflation by the Fed?

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I wanted to believe — but I just couldn’t do it. I am sorry. I took a mammoth position in volatility and SHORTED THE BANKS because fuck them. I kept my longs, so I am once again a hodge podge of stocks doing nothing — going nowhere fast. The market gapped up at the gap down and then rallied only to failed and COLLAPSE into the bell. I view today as a WORST CASE scenario for bulls, as all of their hopes and dreams are dashed across the rocks and their heads smashed in by boulders.

It’s specifically over for America. Get used to it.

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All of the stars appear to be aligned for a small rally, perhaps to the end of the week. We had all of the reasons to REVOKE yesterday’s rally and did plunge at the open, only to reverse said losses and STEAM HIGHER. This rally was built from the bottom up, the smallest piece of shit risk stocks known to mankind. Dare I say, providing Russia doesn’t invade because of Kaliningrad — we might rally until July 4th?

The problem with thinking like this is war and world war and energy embargoes and all of the other SHIT that America and the west is inflicting unto itself. Early going in the Ukraine war, all of Twitter and Reddit were clamoring for Russian blood. Now with Ukraine losing 1,000 men per day, those cries for blood are now met with extreme apprehension as every single facet of American and UK policy falls flat on its fucking head. The Russian economy is booming. The Russian ruble is at new 7 yr highs and all of the west is harangued by multi decade inflation and weak minded leaders who concern themselves with the philosophical questions of gender and carbon footprints, rather than the quality of life and peace for its citizens.

The problem with going too long here is it’s a bet on these people and these people are wantonly incompetent and prone to error. The problem with America is — it’s not led by people who love the American people; ergo, all longs must be hedged until the war ends.

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The Collapse Has Been Delayed

The inevitable fate of the market lower has been delayed. Out of the gates, stocks jumped, except for oil.

I closed out my hedges and also my growth stocks and kept risk averse names because I’m a fan.

You can trade all you want and even perhaps make some money both long and short. The fact of the matter is, this tape is terrible and the direction is uncertain, which is why I’m opting to not trade big.

In the past after being portfolio jumps, I’ve fallen victim to hubris and underwent severe drawdowns as a result. In a sense I’m applying a Constanza trade here by getting small and hedging at all times, with an emphasis on preservation of capital until I see a fat pitch.

I’m down 12bps as of this post, 56% cash.

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I felt good buying stocks yesterday. The market had rallied and people were making money on the long side. For a brief moment, if I closed my eyes, I could see half naked Chamath flexing on Twitter whilst his portfolio of soon to be worthless SPACs crested to new record highs. What could’ve been never panned out and now the only thing heading higher are interest rates and Russian Rubles.

The news is as grim as could be, with the US using Lithuania to blockade Kaliningrad in an attempt to draw Russia into war. It’s all so childish and the faster NATO gets into an armed conflict the faster the Slava Ukraini crowd shuts the fuck up in favor of Slava Lithuania and then Poland and Germany etc.

We saw it coming and present when it all happened, the methodical and purposeful destruction of a great civilization. Too bad history will never know since history is written by the zebra for the zebra.

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These are my least favorite tapes, big gap ups on oversold bounces luring traders into a meat grinder of a RAPE TAPE only to draw down as the opening ebullience drifts and fades and the collapses.

The Dow shot higher by more than 600 today, but all of the gains were had and enjoyed by 10am. For everything BUT old man stocks, the market was LOWER from 10am — meaning if you chased like I did — you lost coin.

In amazing fuckery fashion, I took a +75bps gain and turned it into a -50bps loss — as predicted. I was forced to heavily hedge into the close in order to maintain equanimity into tomorrow.

Here are some intra-day stats for you to digest.

Healthcare +0.9%, DOWN 3.4% off session highs
Tech +1.2%, DOWN 2.4% off session highs.

Getting more specific

Crypto miners +3.7%, DOWN 7% off session highs.
Energy stocks +3.6%, DOWN 3.1% off session highs.

Meaning: if you bought and held you pared down some gains. But if you stepped in after the morning bump hoping for more — you were executed.

This is how people get hooked. If you bought today and didn’t hedge, you are now exposed to a potential -3% day.


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