Talking Stocks 2.0

[chsu74]

I bought a lot this morning. Heavy selling and signs of capitulation with all the indices below 200MA gave me comfort. There will be volatility ahead but i would be more concerned if it was a soft green today.

[-dustin]

I cashed out most of my holdings back in September-ish. At the time I was reluctant, but figured take my +%s and run. Now I'm sitting here wondering if it's a good time to buy back in. I knew a lot of my holdings were way over-valued...and now some I consider to be rather cheap. Hm.

[tnt]

TQQQ, how deep it will be? get ready to adopt some

[330ci]

Was down 5% over the weekend and almost 2% premarket this AM, currently up 1.37% for the day so if we could just close the markets now that would be great. Losses crept back below 20% for the month. Definitely didn't time buying this dip right, just gotta throw some more $$$ in while its still depressed, not the end of the world.

This is my first market correction, and I told my best friend that we shouldn't be making as much money as we were and that this historically speaking wasn't a very good sign and bought anyways. In 10 years I'm sure I'll only be wishing I had bought more

[huncho]

just noticed all indexes are green, amazing

[superdog]

Originally Posted by huncho

just noticed all indexes are green, amazing

what a day. my lord. I suppose this is what they are talking about in regard to volatility.

WOW.

[asloper6001]

Originally Posted by superdog

what a day. my lord. I suppose this is what they are talking about in regard to volatility.

WOW.

Yeah, today had to be some kind of record set in the biggest one-day reversal. I know CNBC would agree haha. Every day is some new record to them. Close to 5% down to positive for the Nasdaq is insane. Maybe the market adopts the crypto market movements.

[huncho]

Originally Posted by superdog

what a day. my lord. I suppose this is what they are talking about in regard to volatility.

WOW.

too much of a rollercoaster to start the week lol. didn't do any work today at all

[GB-man]

Added a bit late this morning. Pain is probably far from over but nice to see some appetite for buying.

[logo]

Crazy day. Used the pop to exit a few positions, as I do not believe that a 5% daily drop then pop is attributable to bottoming out and rational dip buying - that kind of volatility is only from panic buying and selling. I suspect a combo of capitulating sellers buying back on the bounce to not miss out, short covering, and bit of retail trapping pre-Fed meeting. In effect, the indexes closed the open gap that formed this morning. But, if you look as close as Feb 28, 2020, you’ll see a -5% day was followed by a gap down and 5% rally to gap fill. Then over the next few days dropped much further. I do know that missing out on the markets best days can substantially affect annual performance, but to me risk management is more critical as I think risk still exceeds reward for the moment. Just my opinion though.

[Laszlo]

Plunge team outcome.

To the moon.

[chsu74]

Originally Posted by logo

But, if you look as close as Feb 28, 2020, you’ll see a -5% day was followed by a gap down and 5% rally to gap fill.

I remember end of Feb/early March 2020 clearly. That was when COVID really came into the public mainstream media. We were assured that it would never come to the US by POTUS but saw blurps of reports on COVID moving from Wuhan to Iran to Italy. Those were some weeks.



Would love to find more examples and understand the circumstances behind the pop and fade moves.

Edit: there were 4 rate hikes in 2015. Need to go back and chew on the chart but am helping my kid with vocabulary to prepare for a big test. Will chew on it when I get spare minutes.

https://financialpost.com/investing/...terest-rates?r

[7sins]

Originally Posted by chsu74

I remember end of Feb/early March 2020 clearly. That was when COVID really came into the public mainstream media. We were assured that it would never come to the US by POTUS but saw blurps of reports on COVID moving from Wuhan to Iran to Italy. Those were some weeks.



Would love to find more examples and understand the circumstances behind the pop and fade moves.

Edit: there were 4 rate hikes in 2015. Need to go back and chew on the chart but am helping my kid with vocabulary to prepare for a big test. Will chew on it when I get spare minutes.

https://financialpost.com/investing/...terest-rates?r

Lets take a stroll down history lane...

The FED has raised rates substantially only twice in the last two decades, both times without nearly as much transparency as J Powell today. As a caveat, a discussion for a different day when the bond market almost collapsed in 1994 when they raised 6x in one year, but not relevant for my following comments.

The first was from 2004 to 2006, they raised 17 TIMES for 425bp agg. This I do not think is a fair comparison as the 10yr yields back then were ~4.85%.

The second and a more pragmatic comparison was 2015-2018 when they raised 8 TIMES for 225bp agg. The 10yr was at similar levels back then as we are at today. Lets also not forget 2013 when we had the taper tantrum (the end of QE as we are witnessing today). Side bar as my mind rambles, 20 year treasury auction last week was VERY strong.

Okay now lets look at 5 F/BE (forward/break evens) for inflation. This is important.


Look at breakevens as the FED began raising the FED funds rate, you saw 5yr BEs move up and then moderate as rates moved higher. Breakevens today are about 30bp LOWER than they were back then.




Now look at 10yr treasury yields over this period, from 15-18 they bounced around and ultimately ended up right where they started. To my point in several posts the FED ONLY CONTROLS SHORT TERM RATES.

Yes the FED raising the FED funds rates raises the discount rate when doing DCF modeling, which can have an impact for companies who rely heavily on future cash flows with little to no cashflows today.

Now look at returns in the SP500 during each of those years the FED raised rates. It was volatile but you averaged out quite the positive return during that period.



If you are a fixed income investor, YOU WANT RATES TO RISE. Why? Because you can start selling bonds at a loss, build cap losses and then buy bonds with higher yields to generate more income while having losses to offset gains outside your fixed income portfolio. If your fixed income manager isn't doing this, they choose not to, change your manager.

If you are an equity investor, you stay away from companies with no revenue, negative EPS and or skyhigh P/S. We always talk about buying when there is dislocations, and I know it is the hardest to add when you are deep in the red. My biggest clients, $100m-$1B+ aren't adding when markets have momentum, they leg in when markets are over sold.

Have a strategy, stay invested, and stick to your plan. Hunker down, ride the waves and add where you feel comfortable.

Just my .02, not financial advice but this is the time to be legging in, I am further adding here to many of the names we mentioned that are hugely on sale, treb-wt (in the .80s!?!?), auph sub $15 etc etc. It is funny, this thread always picks up when we have downside vol but never when we have upside vol lol. Tequila fixes all short term hurdles, patience and time is on our side and I implore you to think as an institutional investor not a retail investor in volatile times like this.

[strettyend]

Originally Posted by 7sins

Lets take a stroll down history lane...

The FED has raised rates substantially only twice in the last two decades, both times without nearly as much transparency as J Powell today. As a caveat, a discussion for a different day when the bond market almost collapsed in 1994 when they raised 6x in one year, but not relevant for my following comments.

The first was from 2004 to 2006, they raised 17 TIMES for 425bp agg. This I do not think is a fair comparison as the 10yr yields back then were ~4.85%.

The second and a more pragmatic comparison was 2015-2018 when they raised 8 TIMES for 225bp agg. The 10yr was at similar levels back then as we are at today. Lets also not forget 2013 when we had the taper tantrum (the end of QE as we are witnessing today). Side bar as my mind rambles, 20 year treasury auction last week was VERY strong.

Okay now lets look at 5 F/BE (forward/break evens) for inflation. This is important.


Look at breakevens as the FED began raising the FED funds rate, you saw 5yr BEs move up and then moderate as rates moved higher. Breakevens today are about 30bp LOWER than they were back then.




Now look at 10yr treasury yields over this period, from 15-18 they bounced around and ultimately ended up right where they started. To my point in several posts the FED ONLY CONTROLS SHORT TERM RATES.

Yes the FED raising the FED funds rates raises the discount rate when doing DCF modeling, which can have an impact for companies who rely heavily on future cash flows with little to no cashflows today.

Now look at returns in the SP500 during each of those years the FED raised rates. It was volatile but you averaged out quite the positive return during that period.



If you are a fixed income investor, YOU WANT RATES TO RISE. Why? Because you can start selling bonds at a loss, build cap losses and then buy bonds with higher yields to generate more income while having losses to offset gains outside your fixed income portfolio. If your fixed income manager isn't doing this, they choose not to, change your manager.

If you are an equity investor, you stay away from companies with no revenue, negative EPS and or skyhigh EPS. We always talk about buying when there is dislocations, and I know it is the hardest to add when you are deep in the red. My biggest clients, $100m-$1B+ aren't adding when markets have momentum, they leg in when markets are over sold.

Have a strategy, stay invested, and stick to your plan. Hunker down, ride the waves and add where you feel comfortable.

Just my .02, not financial advice but this is the time to be legging in, I am further adding here to many of the names we mentioned that are hugely on sale, treb-wt (in the .80s!?!?), auph sub $15 etc etc. It is funny, this thread always picks up when we have downside vol but never when we have upside vol lol. Tequila fixes all short term hurdles, patience and time is on our side and I implore you to think as an institutional investor not a retail investor in volatile times like this.

Great perspective as always

[superdog]

Originally Posted by strettyend

Great perspective as always

agree. that was a super read.

read an article this am about retail investors running for their lives and dumping stocks like amazon, Microsoft and AMD...obviously others as well. But the point of the article was that retail investors just never seem to learn.

these dips need to happen and the markets will not always rise. buy good solid companies and stop gambling on stupid stocks meme stocks.

long term investor here. watching closing, making small tweaks etc. but not letting this make any drastic changes in my strategy.

amazes me that people still dump their stocks when things get tough.

[FLGatorM5]

Originally Posted by 7sins

Lets take a stroll down history lane...

The FED has raised rates substantially only twice in the last two decades, both times without nearly as much transparency as J Powell today. As a caveat, a discussion for a different day when the bond market almost collapsed in 1994 when they raised 6x in one year, but not relevant for my following comments.

The first was from 2004 to 2006, they raised 17 TIMES for 425bp agg. This I do not think is a fair comparison as the 10yr yields back then were ~4.85%.

The second and a more pragmatic comparison was 2015-2018 when they raised 8 TIMES for 225bp agg. The 10yr was at similar levels back then as we are at today. Lets also not forget 2013 when we had the taper tantrum (the end of QE as we are witnessing today). Side bar as my mind rambles, 20 year treasury auction last week was VERY strong.

Okay now lets look at 5 F/BE (forward/break evens) for inflation. This is important.


Look at breakevens as the FED began raising the FED funds rate, you saw 5yr BEs move up and then moderate as rates moved higher. Breakevens today are about 30bp LOWER than they were back then.




Now look at 10yr treasury yields over this period, from 15-18 they bounced around and ultimately ended up right where they started. To my point in several posts the FED ONLY CONTROLS SHORT TERM RATES.

Yes the FED raising the FED funds rates raises the discount rate when doing DCF modeling, which can have an impact for companies who rely heavily on future cash flows with little to no cashflows today.

Now look at returns in the SP500 during each of those years the FED raised rates. It was volatile but you averaged out quite the positive return during that period.



If you are a fixed income investor, YOU WANT RATES TO RISE. Why? Because you can start selling bonds at a loss, build cap losses and then buy bonds with higher yields to generate more income while having losses to offset gains outside your fixed income portfolio. If your fixed income manager isn't doing this, they choose not to, change your manager.

If you are an equity investor, you stay away from companies with no revenue, negative EPS and or skyhigh P/S. We always talk about buying when there is dislocations, and I know it is the hardest to add when you are deep in the red. My biggest clients, $100m-$1B+ aren't adding when markets have momentum, they leg in when markets are over sold.

Have a strategy, stay invested, and stick to your plan. Hunker down, ride the waves and add where you feel comfortable.

Just my .02, not financial advice but this is the time to be legging in, I am further adding here to many of the names we mentioned that are hugely on sale, treb-wt (in the .80s!?!?), auph sub $15 etc etc. It is funny, this thread always picks up when we have downside vol but never when we have upside vol lol. Tequila fixes all short term hurdles, patience and time is on our side and I implore you to think as an institutional investor not a retail investor in volatile times like this.

It’s been said before, but I appreciate you taking the time to write out your perspective.

[jaisonline]

I stopped buying dips 1 week ago (should have stopped last month) .

Anyway in Oct 2008, I remember 2 days where the S&P was down - 4% intraday to finish + EOD. There was still another 4 painful months for that ‘07-‘09 bear market. Market started turning around March 2009.

Link to table = https://www.ftportfolios.com/Common/...8-628ff9bfe12d

[330ci]

Dumped some ETFs this AM and bought some more stonks and freed up some capital to see how this plays out over the next few days. Hopefully some good times ahead for this young investor. Been waiting for this opportunity for a minute

[logo]

Originally Posted by jaisonline

I stopped buying dips 1 week ago (should have stopped last month) .

Anyway in Oct 2008, I remember 2 days where the S&P was down - 4% intraday to finish + EOD. There was still another 4 painful months for that ‘07-‘09 bear market. Market started turning around March 2009.

Link to table = https://www.ftportfolios.com/Common/...8-628ff9bfe12d

Thanks for the graphic, nice to see it nicely displayed like that.

The VIX holding steady above 30 bothers me, and the decline we’ve seen the past month seems almost too small relative the sharpness of the decline. Selling was/is happening very quickly and would need a large shift in sentiment if a quick reversal is to occur IMO. Just so happens there are a few events happening now that could move markets one way or the other, so it’s time to be prepared. We do know that volatility in both directions can be way up in bear markets vs Bull markets, so it’s important to stay disciplined and try not to get trapped.

I completely agree with 7Sins that there are select good buying opportunities and earnings is another wildcard - AXP for instance crushed it today. I think some choices here are to slowly average in to positions if you are worried about missing a significant upward rally or if you believe the market decline will be short lived, or alternatively you can take the risk of missing out on a rally and wait it out for a more comfortable entry if you think further declines are ahead, which may or may not materialize. I’d emphasize that there are several stocks that look and are cheap, but that does not necessarily mean there can’t be significant further pain ahead (and who knows if there will). If your horizon is long enough or your options choices are not too high risk, they’ll probably do just fine either way but would not be buying in one large lot.

In other news, let us take a moment of silence for whoever sold SPY at 365 today, and a moment of jealousy for whoever snagged those shares lol.

[huncho]

Originally Posted by superdog

agree. that was a super read.

read an article this am about retail investors running for their lives and dumping stocks like amazon, Microsoft and AMD...obviously others as well. But the point of the article was that retail investors just never seem to learn.

these dips need to happen and the markets will not always rise. buy good solid companies and stop gambling on stupid stocks meme stocks.

long term investor here. watching closing, making small tweaks etc. but not letting this make any drastic changes in my strategy.

amazes me that people still dump their stocks when things get tough.

it's pure capitulation, retail just want to get rich quick. goes with everything in stocks, crypto, watches (now lol). this is why i hate when people say they wish they bought something in hindsight and they'd be rich because they'd most likely panic sell on first signs of trouble. hopefully by the end of this, meme stocks finally disappear and we can stop hearing about gamestop

[superdog]

At this point, hard for me to believe the nasdaq is going too much further down.

Pain in the future for sure. But these levels feel more realistic.

[logo]

Originally Posted by jaisonline

Anyway in Oct 2008, I remember 2 days where the S&P was down - 4% intraday to finish + EOD. There was still another 4 painful months for that ‘07-‘09 bear market. Market started turning around March 2009.

Well, there’s 2 days in a row again for us now of opening deep red with buying towards the second part of the day. Holding pattern before news gets out I guess, then we will see which way this moves.

[huncho]

Originally Posted by logo

Well, there’s 2 days in a row again for us now of opening deep red with buying towards the second part of the day. Holding pattern before news gets out I guess, then we will see which way this moves.

it's very weird how both days are playing out. also the weirdest thing to me is how bitcoin and crypto bounced back early in the morning yesterday before stocks did (both tanked in premarket) and they're mostly moving identically for the last few months and both react the same to changes in macro. crypto didn't even react to the open this morning, or futures/premarket, and in reality it's biggest free market since it trades 24/7 and worldwide. i wonder if it's a bit of foreshadowing that the bottom might be in

[logo]

Originally Posted by huncho

it's very weird how both days are playing out. also the weirdest thing to me is how bitcoin and crypto bounced back early in the morning yesterday before stocks did (both tanked in premarket) and they're mostly moving identically for the last few months and both react the same to changes in macro. crypto didn't even react to the open this morning, or futures/premarket, and in reality it's biggest free market since it trades 24/7 and worldwide. i wonder if it's a bit of foreshadowing that the bottom might be in

I'm skeptical. Here's an interesting article from bloomberg - talks about historical trends/situations, not saying those apply to us today necessarily but the charts are interesting. This one here in particular showing the only other times the Nasdaq has rallied back fiercely like we've been seeing.

https://www.bloomberg.com/opinion/ar...eeper-troubles

[huncho]

Originally Posted by logo

I'm skeptical. Here's an interesting article from bloomberg - talks about historical trends/situations, not saying those apply to us today necessarily but the charts are interesting. This one here in particular showing the only other times the Nasdaq has rallied back fiercely like we've been seeing.

https://www.bloomberg.com/opinion/ar...eeper-troubles

i don't feel too good about it either, i saw a stat that said the nasdaq only loses the weekly 50 level on the rsi once every 2 years and when it does it's only the start of the selling. we lost that on last week's close, so doesn't really look great based on that. i know a lot of people don't like technicals but feel like a lot of the time they make sense, but also we have a big catalyst tomorrow so we'll see. so far tomorrow doesn't look great with the way microsoft looks after hours though

[logo]

Originally Posted by huncho

i don't feel too good about it either, i saw a stat that said the nasdaq only loses the weekly 50 level on the rsi once every 2 years and when it does it's only the start of the selling. we lost that on last week's close, so doesn't really look great based on that. i know a lot of people don't like technicals but feel like a lot of the time they make sense, but also we have a big catalyst tomorrow so we'll see. so far tomorrow doesn't look great with the way microsoft looks after hours though

Yes, 2018 and 2020 had this. If you look at the weekly moving averages there, as the RSI drops the nasdaq breaks through the 50d, breaks through the 100d (12,600 currently), and bottoms somewhere between there and the 200d (10,230 currently).

[strettyend]

Originally Posted by huncho

i don't feel too good about it either, i saw a stat that said the nasdaq only loses the weekly 50 level on the rsi once every 2 years and when it does it's only the start of the selling. we lost that on last week's close, so doesn't really look great based on that. i know a lot of people don't like technicals but feel like a lot of the time they make sense, but also we have a big catalyst tomorrow so we'll see. so far tomorrow doesn't look great with the way microsoft looks after hours though

Take another look at msft AH lol.

[logo]

Originally Posted by strettyend

Take another look at msft AH lol.

lol this market has lost it's damn mind. Rallying a 2T company down 2.5% on the day, down 5% after hours, then rally it back up 10% in the same AH session, absolute madness haha.

What I take from this and the past two trading days is that there is either wild disagreement amongst investors on which way the market is headed, or someone is playing with us.

[huncho]

Originally Posted by strettyend

Take another look at msft AH lol.

[superdog]

Originally Posted by logo

lol this market has lost it's damn mind. Rallying a 2T company down 2.5% on the day, down 5% after hours, then rally it back up 10% in the same AH session, absolute madness haha.

What I take from this and the past two trading days is that there is either wild disagreement amongst investors on which way the market is headed, or someone is playing with us.

From what I understand they altered their projected outlook.