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
21,895 Blog Posts

Markets Recovering Amidst Extreme Oversold Levels

Just to put this morning’s rout into perspective, the Stocklabs oversold algos went oversold on our 10yr algo. The last time that occurred was COVID lows in 2020. We had just 3.5% of large cap stocks rated bullish and in the past anything below 10% marked a short term bottom. Bear in mind, we are mainly day trading or swing and these pivot points are important on short time frames, no more than 10 trading days.

The bullish outcome here would be an invasion of Ukraine limited only to Eastern Ukraine with zero response from NATO. If Russia fucks with Kiev, we might see this spilling into the Baltics and we might see actual missiles hitting Warsaw by February.

Let’s assume we have hit a point in the narrative that the damage done to stocks is so severe it might limit the Fed response to tightening, although I doubt it. Then again, REAL stocks are now getting hit, with AMZN down 20% the past month and NVDA off by 27%. There is an array of stocks we once loved down by half and although tempting to buy them all — they just keep fucking dropping. Shares of SHOP and SE and many others are very tempting — but instead of opting for stocks I am focused only on two ETFs — biotech via LABU and tech via WCLD.

At session lows I was down 1.6%, even though I had UVXY into the open. I am now +20bps but not taking for granted the fact that the close might be collapsed.

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We’re down hundreds more and the DAX is down more than 3%, as the Ukraine braces for a Russian invasion. The Russian markets are off by 6% and it seems NATO will use Ukraine as a pretext to finally lure Russia into war, a bucket list item for bastards everywhere.

As we heave over and keel, the markets are violently crashing lower. I sold my UVXY hedge and now I’m naked to the markets, having been tricked into believing a morning flush and rally was in order. But that doesn’t seem to be happening now, so I can only hope and pray and then pray some more.

Shorting here is ok only if paired with longs. If we reverse higher today, it would be textbook capitulation and could be a fantastic run. IF.

But if we close at the lows, we’ll likely flush out again tomorrow.

BTW: if you think stocks are bad, look at cryptos.

My only positions are LABU and WCLD.


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An Epic Oversold Rally Looms

The biggest gains will be found in SAAS and biotech, the hardest hit rising fastest. The shit stocks hammered to dust might not reflex right away due to weak shareholder based forced to liquidate. However, due to the pressure in the markets you should not expect a V shaped recovery and instead a series of pops and drops that might grind people worse than just a mere rout.

The first mistake was being long at the wrong time. The bigger error would be to short into the hole and get caught in a squeeze and then either double down on those shorts into an even further squeeze based upon recency bias. The back and forth of a bear is what makes it worst.

I’ll try to max gains into the squeeze and then keep longs and shorts and sell them fast, playing for small ball. I will, however, accumulate into any further weakness and will not sell because the next big move, in my opinion, is up.

Nothing more I can say but good luck. Futures are up 100, which means nothing. We’ll get better clarity when Europe opens for trade.

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A Wretched Bidless Biden Tragedy

That did not go as expected. We closed at session lows down 385 NASDAQS on top of a backdrop where SAAS and other high valuation stocks are already down 22% for the year. When bubbles pop and the pieces are picked up, we will know where the bottom was only after the fact. Before the fact, we can only guess.

Here is the PS ratio and historical valuations for tech bellwether CRM.

8.6x seems like a good level to dive in and I am heavily long WCLD — based on the fact that CRM is now trading 6.7x 2023 sales, providing they meet expectations. I sold almost everything early on, took immense losses in SHOP, MTTR, TTD and I initiated hedges in DRIP and SOXS. All of these moves on an intra day scale made sense and I still closed down more than 2%, finished the week off by 7%. I closed with a 26% weight in WCLD, 5% LABU and 5% UVXY just in case. I have 62% cash and the reason for this is I am now down 10% for January, coming off -2.6% in December. I have not managed the market well, a little too soon and a little too late. There are been so many trades I missed and sales I held off because I hoped for a rally. This trust, based upon the learned behavior of the market the past 12 years, has caused me to be complacent.

It is true the markets are oversold inside Stocklabs and it is true the oversold signal that flashed yesterday failed. This is not the first time the OS failed and it won’t be the last. These signals, at times, can be wonderful crutches and helpful in navigating the market. But there are times like now when the narrative is shifting and the ideas of a bounce are foreign and it is during those times we get true dislocation.

My best guess is for a sharp mean reversion rally soon but I cannot allow myself to bet too big because of my losses. The ultimate goal is to remain in the game and to limit losses during periods of duress. The best way to do that is staying loyal to stop losses and accepting the fact you were wrong and lost the chance at playing SHOP because it fucking tanked into your face you fucking moron piece of shit.


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Capitulation bottoms looks like what you just saw.

I rode into today with 20% of my book in DRIP and at the lows I was still down 280bps. It was hell and we might not be out of it yet, as SCAM WICKS have a way of popping up and dropping down those red candles. Nevertheless, it appears the panic selling has abated for the moment in spite of some harsh volatility still underway. The selling was indiscriminate — but there was strength in biotech and of course old man dividend stocks. The worst hit were in oil and tech and the tech debacle reached a crescendo of absurdity with stocks like MTTR off another 10% following a 60% rout the past month. It appears there are bids in the tape now and it’s tempting to want to believe. After all, hope is infectious and speaks to our aspirations. But how would you feel if this was 3:30pm barreling into the weekend ahead of the Putin led invasion of Ukraine?

Perhaps hedges are still preferred. Although if you hedge you miss out on a FUCK YOU SHORTS YOU’RE DEAD rally that can still happen. Whatever happens today will be forgotten and if you slept in you did yourselves an immense favor. The larger picture here is pain and this pain is pan-market across the entire industry and that negative wealth effect has consequences.

More later.

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This is most inopportune and most inconvenient and it will take a period of adjustment to trust to never trust the market and to sell it always and to also be mindful of oversold rallies, which can be vigorous and energetic to the upside almost as severe, if not more, to the downside. To sit here now with NASDAQ futures down 205 and predict lower prices would be juvenile. After all, most of you have been spoiled rotten the past 12 years in a bull market. But now the party is really over — since the Fed is over a barrel — ass exposed to the markets anatomy.

They can’t back down from hiking with CPI approaching double digits. They cannot print more and also taper and hike — that is stupid. They can and will do nothing, until both rates and crude COLLAPSE. The problem with crude collapsing is war between Russia and Ukraine. Tomorrow Sec Blinken meets in Geneva with Russia, at which point Russia will make demands the US will not accept and the cast will be died and war will happen within a week.

Netflix announced weaker than expected results, just following yet another hike in their monthly subscription. For those unfamiliar, about a decade ago Netflix nearly bankrupted themselves after their first rate hike and it took Carl Icahn to instill shareholder confidence which led to a PIPE offering which eventually bailed them out. Since then, Netflix has gone straight up and with their newly founded riches have went on to make the shittiest fucking shows and movies ever created — truly establishing themselves as blue haired freaks who care more about their cocks than their content.

Following the news at Peloton, who said they’re delaying production of their fucking bikes, this is leading up to and dancing around and into the idea (bear with me) that a recession might occur whilst in the midst of RAPID NECK BREAKING inflation aka stagflation. You can see it in the housing related names like MTTR, TREX, FND, TOL and many others. Even fucking burrito stocks (CMG) get hammered daily.

Either one of two things is happening now.

1. We are pricing in a recession and there is no floor because we have no idea how deep it goes.

2. This correction is nothing more than that, highlighted by some harsh pullbacks in the highest valuation stocks traded — a well deserved albeit delayed response to exuberance gone mad.

Either thing does not help you trade tomorrow or into next week. Do not confuse the macro with micro. The next trade, obviously, is way up — immediately following getting blown the fuck out.

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It started off with bright sunny skies, horses peacefully grazing in the pasture with children picking flowers in the meadow — a pleasant view as you read your novel and sipped on your chardonnay. By lunch the sky began to cast and the subtle gray could be seen in the horizon, steadily but surely creeping towards you.

By afternoon, Peloton announced business was so fucking good they stopped manufacturing their product. Shares were cast heavily lower after a trading halt and the mood became grim — the skies blackened and the fucking horses became scared and stampeded through the meadows running over the children. The skies opened up and before you could see the sun disappear, lightening was striking down upon you — flashes of blue and white illuminated your fields — book set aflame and chardonnay ostensibly evaporated into particles.

The NASDAQ went from +230 to down -180bps and everyone involved lost big and everyone who shorted won big and everyone who tried to trade the ranges found themselves lost at sea. I bore witness to horrors, as my gains of +180bps vanished into thin air, with my chardonnay, closed down 150bps even after dumping 20% of my portfolio into DRIP. I had a plan and then I got punched in my face. Now I have to pray.

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News hit about a half hour ago that PTON is in fact fucked.

This also ravaged shares of AFRM now, as the Buy Now Pay Never schemers are closely tied and knitted to the testicles of Peloton.

It appears this news is NOT being digested well, as shares of PTON careen lower by 25%, vomiting onto the faces of the entire market. The NASDAQ really cleaved down a bit over the past hour and +170 is a nice gain — but we want more.

You might be asking yourselves “why the fuck does PTON affect the market?” Because retail, because it means GROWTH IS SLOWING. Maybe just maybe RECESSION LOOMS. All of these thoughts and much more are directly into the minds of managers now. Hence, you get a sell off.

We might recover from here and close near the highs. But rest assured, this is the first of many warnings to come and when they start to come in strongly — the market will then begin a process of really taking down multiples.

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Rebuild with Quality Stocks

If you fucked up and find yourself wishing for a miracle, your pink levels are 1,000% and you need to clean slate. Often times at market tops people get stuck with the most speculative stocks because risk was rewarding then and the highest returns were found in the very worst companies. During declines those stocks lead the way lower and the trap is believing those shit stocks will bounce the hardest.

That’s not the way this works.

Those stocks are finished for good, or at least for a while. The stocks to bounce first are ones of the highest quality, names like SHOP, SE, SQ, TTD, SAAS stocks, NTLA. Yes I’m talking my book because I know what should rally during an oversold bounce. I know because I’ve been doing this so fucking long it is ingrained in my DNA.

If we reverse lower today and this small bounce given up, you would expect some truly horrible price action to follow. Don’t spend all your cash and if you’re selling short, consider it a hedge against longs. Net shorting into a hole often leads to men jumping off buildings.

My position is 50% cash, the rest long in quality names. The cash will be used to average down or in or even up into the stocks mentioned above.

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This is the worst economic environment since 1819. The piece of shit President is more concerned with COVID shots for 5 year olds and voting rights than what the fuck is happening in this cock-sucking market. We have ARKK down 49% over the past year. This is exactly what the average retail investor has withstood.

We are in fact rudderless, drifting off into the sea of sharks — consumed by the inclement weather — forlorn and lost. This is the worst month since March 2020 and just like I blamed Bush for being a feckless hazard piece of shit in 2008, I am blaming Biden today. The man is for all intents and purposes dead. He is in fact a useless caricature of what a man is supposed to be, let alone being a leader for the free world. The word free is humorous, since we are less and less free each and every day. The cunts just passed the infrastructure bill that will place KILL SWITCHES in all of your cars by 2026.

Biden and his ilk do not care about the market or the economy or anything else. All they care about is profits for Pfizer. I cannot tell you why and I hate to tell you this too — but voting is overrated and I couldn’t give a fuck about votes. Let’s talk about the IWM and how is spirals each day and how stocks like SHOP are off by 30% the past month, pricing in a Russian invasion of Vancouver.

We have been cracked like an old plate and no one is around to pick up the pieces.

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