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Bob The Bear Stopped Out: "I Did Not Expect Such A Strong Risk-On Move In Response To Such Bad Data"
Bob "the Bear" Janjuah has a confession to make: three weeks ago, on September 29, he expected the market to behave rationally, and to stumble further ahead of the worst earnings season in years with the global economy poised on the verge of recession thanks to the EM crisis, in no small part because China has already seen half a trillion in outflows. He was wrong - the market tantrummed, Fed presidents admitted the Fed's "S&P > 2,000" mandate is the only one that matters, and the rest is history. As a result Bob has been stopped out.
Even though I had expected Q4 to contain lots of two-way volatility my expectation was generally for another risk-off quarter, and I felt that my S&P stop loss (weekly close above 2020 on the cash index) would afford me a prudent degree of cushion and comfort to absorb this expected two-way volatility. I did not expect such a strong risk-on move in response to such bad data!
So what's next:
I would not be surprised to see attempts to recapture the highs of the year over the next few months if the 2020 level holds. Weekly closes between 2020 and 1970 are in the neutral zone for me now where I'd recommend being flat/extremely close to home. Weekly closes in the S&P 500 cash index BELOW 1970 would get my bearishness reawakened, and put 1820 and the low-1700s back on the radar.
Alas, the S&P below 1970 would also renew the Fed, ECB, and BOJ's jawboning which will promptly send the S&P right above 2000 all over again, and so on...
Full note below:
Bob's World - Stop loss triggered
This is an update to my last note released on 29 September (Bob's World - Priced for recession?). As one of my (two) market stop losses has been triggered it is now necessary for me to reconsider the themes and recommendations set out in my last note.
Since I last wrote the market is now seems to agree with my long-standing concerns on global growth weakness, on the ongoing victory of disinflation/deflation over inflation, and on my long-held view that - globally - central bank policy will stay looser, and get looser, for longer. The last shoe to drop was around the FOMC, whereby after the recent payrolls data the market is now in line with my long-held view that the FOMC has no data-driven justification to hike rates anytime soon.
In fact the markets are so in line with my views that the expected Pavlovian reaction - that weaker data will lead to central bank action (balance sheet expansion), thus driving risk-on positioning - has led to my equity stop-loss trigger being activated. Even though I had expected Q4 to contain lots of two-way volatility my expectation was generally for another risk-off quarter, and I felt that my S&P stop loss (weekly close above 2020 on the cash index) would afford me a prudent degree of cushion and comfort to absorb this expected two-way volatility. I did not expect such a strong risk-on move in response to such bad data!
Where does that leave me?
First, I would point out that my other core market view - to be long core rates duration - has performed extremely well with my sub-2% yield target on UST 10s being hit. I have also highlighted how markets are seemingly in line with my fundamental views on weak global growth and strong disinflation/deflation.
Going forward from here I see no reason whatsoever to change my fundamental outlook. In terms of my core rates long duration call, I am persisting with this position, but am now going to move my stop loss, from a weekly closing cash yield on UST 10s of 2.4%, down to 2.2%. This move gives me protection while also crystallising some 20bp to 30bp of gains in terms of the yield move on UST 10s since my May recommendation.
In terms of equities, for as long as the S&P 500 cash index sustains a weekly close above 2020 then being positioned for risk-off no longer seems appropriate. Rather, I would not be surprised to see attempts to recapture the highs of the year over the next few months if the 2020 level holds. Weekly closes between 2020 and 1970 are in the neutral zone for me now where I'd recommend being flat/extremely close to home. Weekly closes in the S&P 500 cash index BELOW 1970 would get my bearishness reawakened, and put 1820 and the low-1700s back on the radar.
To wrap up my view here is that markets now think they are ahead of the curve with respect to fundamentals, and markets now also think that central bankers have caught up again with the curve and thus that they stand ready to act. I still fear that over Q4 2015 and into Q1 2016 both these twin pillars of consensus thinking will likely come unstuck, as the fundamental outlook deteriorates far more quickly and more deeply than the consensus can currently envisage, and as markets realise that the Fed put is far far away from here (in terms of the data, in terms of time, and in terms of asset (equity) prices). But until that happens, and for as long as the 2020 level holds on the S&P 500 (weekly close on the cash index) then it makes sense to further participate in this latest bout of Pavlovian antics.
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Oh, boy.
So Gartman was wrong (again?)
The greedy socialist jew bankster cartel has plenty more sheeple to shear....short at your own peril....
If anybody out there thinks they are going to short this market, make a fortune and then do a victory lap around the country crowing about beating the system is in for a large surprise. You are the enemy.
The market will go down, but the plan is to jerk the market around the whole way down and destroy every single short.
Up, down, down up, down, down, up, all planned and you lose.
What markets has he been trading since 2011?? That's equivalent to saying, "I did not expect the sky to be blue, or bankers to steal,
or water to be wet", etc...
The Fed can print, all you need to know.
The FED needs to end its illegal fraud for the Rothchilds. May they burn in hell as well as the royal family of England.
Now that Bob is stopped out on his short, the market will crash.
Not really, in 2 weeks we'll see the start of the end of the year rally.
And now that a lot of retail investors got burned on their shorts, they'll try double or nothing on a call.
It will work off course it doesn't and that will become clear in januari/februari where everybody will cry dow 25000 and then it will crash. Maybe.
But the most important is that there's still a shitload of shorts who need to cover and can't afford that so we'll see about 2 short squeezes in the next 2 months.
And a few suicides...
"Now that Bob is stopped out on his short, the market will crash."
Not until every single short has been destroyed.
They want to raise rates, they will raise rates but the market must be UP for them to do it...once they do, look out below...
To wrap up my view here is that markets now think they are ahead of the curve with respect to fundamentals...
What fundamentals? Most of the companies are making nothing, their margins are down and if not for stock buy backs, would have collapsed in price. This is what cheap money has done to America.
The only real "fundamental" is the "FEDamental". No mention of technicals; they are dead as well. Must be nice to see how the market day goes and ends before it starts.
The bear got stomped by the endless manipulation by the Fed. This has been going on since the last financial crisis.
Without the wealth effect of rising stocks, US economy would crash. So the Fed's first three mandates are to levitate the stock market.
This has in fact been going on in the bond "market" specifically since 1971. I wonder why, amazing isn't it?
Of course, Bob's so "rational" that he'll sell stocks once they go lower, and buy them once they've recatputred all-time highs.....rational.
You fucked up Bob, you underestimated the Maniacal Monetizers....even nuclear weapons wouldn't stop them now.
Don't feel too bad, Bob. Lots of bears have gotten skinned alive thinking similarly the last few years.
That is exactly why it works.
It's almost like there's...... a pattern or something.
He must not have seen the sign...
Broken market rule # 1 : Bad data is good data.
Dear Bob. EVERYONE expects the FED to blow QE 4, 5, and 6 before they ever raise it 0.25%.
The latest batch of bad economic data combined with continued FED dovishness and the subsequent ramp has confirmed this.
The world is in recession and EVERY central bank is pushing liquidity. Where would you rather be, in bonds? You'll get your head handed to you. Stocks are the current "Risk-off" approach in a world of Central Bank Puts. Frigging Bonds are the highest risk asset.
"Bonds are the highest risk asset." -- LOL! not until rates on the ten year are negative, of course by then the Fed will own then entire "market"...
I think we'll test 1.6 again on the 10 year.
But. Do you want a 10 year note bearing 1.6%? I sure as hell don't like it. Not with REAL inflation over 6%.
I don't like stocks a whole lot better. They've been pumped up to all time highs by FED largess.
Still, suppose stocks fall 50%? What are bonds going to do over the next 10 years? They could go from 2% to 6 or 7%. I think there's more risk in bonds.
Overall I've hedged it three ways. 1/3 stocks, 1/3 treasuries, 1/3 money market. I figure when the SHTF i'll still be holding 1/3 of it.
You guys just don't get it, do ya? BTFD!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! LET "ER RIP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I am convinced of this: The country will look like something straight out of the movie "The Day After", but the boxes will still be churning out buy orders on equities that no longer exist. DOW 50,000!!!!!!
LOL! Best post I've read all day.
Uh....is the sarc off or on....or both?
LOL! What part of NO price discovery don't people understand?
Everything will "officially" be awesome henceforth...
Thanks Bob. Bob...
Honesty? Man that is rare these days.
FOOL
Where the fuck has he been?
So Bobs strategy seems to be Short Low. And Cover High. Good Luck Bob.
fwiw, back in the day, just before the 10/2/2015 NFP report, using a simple idea of trading against key price points on the daily chart, and considering that the selling all began late June, there was never a new high in early July, so the market never gave up that edge for the perfect short, well, in the total context, it was a perfect opportunity to get long. NFP is a manufactured # as far as I can tell, and despite the FED's talk about raising rates, I believed they needed a soft # to give them cover to distance themselves from rate hike talk. There is a website where you can post your forecasts, and I posted 165k NPF (actual was 148).
The bears pretty much have always been wrong for so long, and sometimes they get lucky, but when the chart looks like it did 9/29 - 10/2, the odds of sellers coming in flat-footed at the lows and ripping a big move were pretty much zero - esp when the Beast needed cover to step away from rate hike talk. I had a few SPs 1871, 75 and 80 (long). That was a pretty high probability trade, with limited downside risk.
The reversal on 10/2 was pretty dramatic, and I am not surprised at all to have seen so much follow through buying. The market is now up solidly for the month and the quarter, where the 4th Q is very often bid, so the bears are just gonna have to hold their stomach, because the buying you think is impossible and cant happen is more likely than the selling you hope to see.
November might see some selling, but December will end up with a gut wrenching rally into the end of the year.
Jobs don't matter. The BLS fixed the stats. Earnings...Companies will just borrow more at 0% and buy-back existing shares.
Surprise, not!
It's all front-running the Federal Reserve now.
Same as it's always been for the last 6 years.
Moar QE/helicopter money coming.
More debt and printing.
Fed has a only a hammer, just keep getting a larger hammer until it's fixed real good (F'd up).
Poor 'ol Bob. "Faith in Fed" crushed him and the other bears (again). The worse the earnings, the more Fed hope rises. The bears see weakness and pile into the markets and within hours are stoppped out. Rinse-repeat, now after 7 years you would think they would learn. Yes, the day will come when they are right and it all falls apart, but timing that day is exceeding difficult. Duh!
Fundamentals get you out. Way way too early. But still out and all alone. The alternative is to join the Kool-Aid Party and (eventually) ride this all the way down, secure in the comfort of knowing that you are not alone.
Bob- It's called market manipulation. Head to Macau you'll have better luck.
What a fucking loser....does he have AUM? No one can fucking predict anything, especially these "experts".
stepping back, what is price? metrics of freecashflow,debt,profit,forward earnings, book value..with zirp:1. co's buy back stock, off setting poor sales and economic weakness in the economy..while banking high priced equity2 .co's fire workers thus reducing costs and thus improving metrics stocks go higher. (debt at zirp is given less weight so it can expand)..
turn off zirp and the magic stops..so here we are, in an economy where workers income drops to 3rd world while ceo's and tbtf are awash in wealth.
I'm short as hell right now. Mostly by way of leveraged ETF's so the pain can be intense. But I'm long term bearish using SPY call options to hedge. Oh yeah...I'm short oil too. The reason? We wil re-test that 42-44 range soon. And equities face the 200 dma wall from hell as well. If the SPY breaks above the 200 and closes above for several sessions, we are off to all time highs and maybe even eclipsing the 2,200 level by year end. If we fail at the 200 dma resistance... we may see 1790 by year end. lol. Or it's all bullshit and we all wake up in a snow globe soon. Either way...
excellent post.....agreed. I'm "hedged" long the indices down and dirty, to offset my recent bonzai shorts....couching it by going short mechanically (all time highs/short...)
oil? depends on Putin/the ME/"hot wars" - but overall I see consumption weak globally....
Poor, Bob. Right at the peak of this move, too. When the ECB and BOJ disappoint over the next week he's going to wish he hadn't done that
RAtional thought has no place in an irrational environment. The markets are the Fed's sandbox. If you don't want to step in poop, don't play in it...
It's ok Bob the Bear, you can get that money back by suing the shit out of the fed and any other accomplice (citadel) for your losses due to illegal manipulation. I would expect a few others would be up for this type of law suit and more than a few lawyers would love to collect on a class action suit like this.
As the economy burns the zombies get out marshmallows and throw a party.
Typical.
Trading is risky. If you're not making money on a regular basis, maybe it is not you. Maybe it is just a bad business. I've had mixed results with my own efforts over the past thirty years.This is part of my story. I tell it with the hope it will help someone, i.e., save them money. Jesse Livermore reputedly said something to the effect that it is the rare man who can honestly say the stock market does not owe him money and that is probably true.
I've never been successful with options, notwithstanding I had very advanced statistical programming knowledge in my background left over from graduate school. Transaction costs ate all trading profits. Tempting as they were, the profits in options failed to materialize. Leveraged etf's worked much better for me, but they remain high risk. Use with caution, carefully limit your exposure. Big gains always imply the risk of big losses.
I've steadily reduced my overall exposure to the market since metals tanked about four years ago. Fortunately, I sold that top, so I was in a position to take a break. I needed that win, though, because I'd taken a big hit during the crash betting on a Lehman bailout. Ironic, because I was a bear. I bought Palladium at the post-crash lows and that worked out very well for me...paid for my comeback.
My most recent "trade" was to pull half of my capital out of my trading account after taking a 10% hit in July. Prior to that, I was up about 30% year-to-date. Since then, results have been flat. Only ten percent of my capital is left in my trading account, now, and only half of that is invested, today.
I'd shut it down entirely if I did not feel like I needed to hedge a bit and watch the markets. I think another crash is highly likely.
I do not need this...
If it is not fun and/or profitable, I'm always ready to let it go. I'm half out the door now. My condolences to the young and the old, for different reasons.
To the young, let me say this: I'd gladly trade my money for your youth, regardless of the obstacles you face. And I say that even though my health is excellent, so far.
To the old, you know the score...I do not need to tell you what America has lost. Just, enjoy each day and realize that none of it matters. Life is just a game.
excellent post. thanks
I've seen this in 2000 and 2007... when people are so conditioned to believe the market won't drop, and their natural human greed can't stand to miss out on another 10% upside, the crash is at the doors. Everytime there is a bubble people think THIS time is different. They will be wrong. Go long unlevered short ETF's.
This market is nothing like the 2000 market. It does resemble the 2007-2008 period, though. Picking tops is tricky because major tops are statistically very rare events. Scale in, scale out, and trade around the position...just my two cents.
But... go back over the last 5 years... every single time the S&P chart broke the upward trend... we got another dose of QE. 2010 was QE2... 2011 was when the ECB decided to get in the QE game... 2012 was QE3... Operation twist was in there somewhere... The only way this market stays afloat is another round of QE. But there's no way to tell how the market will react to that.
It's pathetic that the only information we need is what the FED is going to do. Quarterly earnings? who cares...just hope its bad. China? hope they collapse. Europe? so what. Russia? Oil? Syria? Saudia Arabia? Brazil? who cares. Just hope its all bad so we get more easing. It's the most f*cked up "market" we've ever seen. And it's going to end very badly. VERY very badly.
CNBS posted this same information on their website, they just waited until the market was a the low of the day to do it!
Janet says perfect timing!