“I was born for a storm, and a calm does not suit me.”
-US President Andrew Jackson
On this day in 2008, the US Stock Market crashed after the US Government wasn’t able to pass a bailout vote. We made money that day. We also made money in October of 2008. I didn’t buy into the Old Wall’s “seasonality” narrative, thankfully.
How have you done, weathering the storms, across Full Investing Cycles? I was a newb for my 1st one (2000-2002), but somehow made money and lived to play for the next bull market. Patience and #process isn’t something I struggle with.
In markets, many people struggle with their biases, mandates, and emotions. I try to rid myself of those using math.
The aforementioned quote was one Isaacson used in Elon Musk: “He became one of those people who feels most alive when a hurricane is coming.” His brother Kimbal says “he is a drama magnet – that’s his compulsion, the theme of his life.” (pg 6)
You don’t want the Risk Manager of your hard-earned capital to be that way. It’s a different job. I feel most competent in markets when I am feeling nothing. After hurricanes hit, I score myself on how proactively prepared we were for the drawdowns.
Back to the Global Macro Grind…
Post a broad basket of US stocks having another nasty -12% drawdown and the beloved QQQ revisiting Full Investing Cycle Crash mode at -19% from its #MOAB (Mother of All Bubbles) 2021 Cycle Peak… we get the bounce.
That’s the thing about bears, they bounce.
In fact, they bounced quite a bit back in 2008 and I have the battle scars to show for it. Every single mistake I made while I was bearish in 2008 to when I went bullish in April of 2009 is #timestamped on our website.
As you can see in the Chart of The Day:
A) 2008-Present I have 7,364 #timestamped (closed) positions in Real-Time (Coaching) Alerts
B) In the last 4 weeks I’ve batted 97.6% from the Short Side
Yep, by the standards I hold myself to, I sucked in Late June to Late July. All the data is right there for you on the page. In September I haven’t sucked. And in order to not suck in Shocktober, I’ll be re-loading on the Short Side on green today.
If you’re hunting for bear, what are you looking for? Well, every Cycle is different, but the patterns of Bear Bounces repeat:
A) I’m looking for LOWER-HIGHS within Bearish @Hedgeye TREND Signals … that
B) Bounce on decelerating volume, preferably into something real like a month-end markup
If you didn’t have the patience and/or risk management #process to sell into #MOAM (Mother of All Markups) into that month-end markup of July 2023, you need to #GetBetter. Those opportunities will happen infrequently in your career.
You need to be in a Full Cycle Bear market to get those opportunities. This is only the 3rd bear market of my 24 year career.
What else are we looking for that’s uniquely American and therefore unique to this Cycle?
A) Bear Basket Squeezes
B) Rate Sensitive Shorts (XLU, XLRE, etc.)
What’s a Bear Basket Squeeze? A: Goldman Baskets created to reflect Factor Exposures that whip Hedge Funds around:
- GS Bitcoin Sensitive Basket got squeezed for a +4.1% move yesterday
- GS Liquid Most Short Basket (from their prime brokerage data) squeezed +1.9% higher yesterday
- GS High Retail Sentiment Basket got squeezed for a +1.8% move yesterday
Generally speaking, these baskets reflect the #MOAB (Mother of All Bubbles) that has been imploding since we got the Twin Cycle Peaks of Bitcoin and QQQ peaking within days of one another in 2021.
So you’re saying there’s a chance!
You know it. I know it. If you’re a bag-HODLer, you just want your bubble back. And that can absolutely frustrate the “fundamental” Hedge fund Manager trying to risk manage legit shorts that “should” work, but sometimes don’t.
But guess what’s also in the midst of a 1-month PRICE MOMENTUM drawdown of -12%? A: High Short Interest.
Yep, eventually, it’s The Gravity that gets the “haha, AMC” Meme dude on the Reddit Board and the “High Retail Sentiment” names that require no research and just a 50-day Moving Monkey Chart for “feeling” smart.
How about that un-regulated but consistent month-end-markup in Crypto and Bitcoin this morning, eh!
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.44-4.84% (bullish)
UST 10yr Yield 4.34-4.70% (bullish)
UST 2yr Yield 4.99-5.16% (bullish)
High Yield (HYG) 73.15-74.34 (bearish)
SPX 4 (bearish)
NASDAQ 12,843-13,551 (bearish)
RUT 1 (bearish)
Tech (XLK) 158-168 (bearish)
Energy (XLE) 88.57-93.18 (bullish)
Utilities (XLU) 58.43-62.53 (bearish)
Nikkei 31,674-33,650 (bullish)
BSE Sensex (India) 65,101-68,002 (bullish)
DAX 15,088-15,664 (bearish)
VIX 15.43-19.98 (bullish)
USD 104.67-106.63 (bullish)
EUR/USD 1.050-1.071 (bearish)
CAD/USD 0.740-0.747 (bullish)
Oil (WTI) 88.11-93.22 (bullish)
Oil (Brent) 91.10-95.36 (bullish)
Nat Gas 2.70-3.03 (bullish)
Gold 1 (neutral)
MSFT 305-324 (bearish)
AAPL 167-177 (bearish)
Bitcoin 25,859-27,237 (bearish)
Best of luck out there heading into Shocktober,
KM
Keith R. McCullough
Chief Executive Officer
