Curious if you’ve looked at how seasonality varies in years with down markets. Combination of EPS revisions and tax loss selling in coming months are on my mind, but I doubt I’m terribly innovative with that thinking. I remember too many years where it seemed like markets were weak into year-end for no apparent reason, and wondering how big tax loss selling was as a driver. Also the reality that some institutional investors mark their books at the end of October.
thanks Stephen. the factors you mention of tax loss selling and Oct year end for many mutual funds are true every year. i mention above that i think tax loss selling came a bit early this year (i.e. part of Sept sell off)...its a judgement call, but why wait for crappy 3Q earnings season to sell something you are selling anyway? if you study the seasonality table above you will see that Oct and 4Q seasonality tends to be a little better in down years thru Sept
Thank you for a very clearly laid thesis for a bounce. Do you consider consider volatility premiums and discounts in your shorter analysis? Why/why not? Thanks a ton for this.
you mean do i consider volatility in my short term trade views? yes, but generally find that delta is >80% of the trade outcome. there will always be a trade structure that could have made you more money for a given outcome, but you need to weigh that against probability of gain and other circumstances. in this case, i chose short dated call spread to reflect the view for higher stock prices, but mitigate somewhat volatility exposure.
in hindsight i could have done some on 10/14 expiry and some on 10/31 expiry to optimize the view...but try to reduce complexity in views and leave some of the creativity up to the reader.
no not at this time. range of risk tolerances, experience and access to wide to have a model portfolio that truly reflects my opinion. i think more effective to provide framework, indicators and relationships people can incorporate into their own work and along they way flag some trades that have broad appeal
thanks for the feedback erik. lets see how it evolves but seems the data was indicating some kind of washout. always hard to know w/ conviction how far these moves go given weak fundamental conditions but nice start
Your note comes at a perfect time for me as I too am struggling with the extreme bearishness vs. potential for bounce. Could we get a market crash from here? Possible, but more likely we get the counter-trend rally that puts market participants off-sides, again.
thank you for the feedback and sharing your perspective. very difficult, uncomfortable time...a bounce or break moment. i'm totally open to the idea that we go a bit lower first, but think we are increasingly vulnerable to a piece of good news or headline that catches late shorts and underweights flatfooted at a time of year when many are pnl sensitive...so an up move would hit people at a tough time. complicated. i remain of the view we are in bearish trend, but took out some insurance on the possibility of a sharp, short term up move.
Thanks Mr Blonde. Respect your views and so this was NOT the note I wanted to read! I did in fact scale out/ trim of some single stock shorts/puts (SOXX, UBER) this week but promised myself not to get shaken out of my core NQ 11k Dec puts. Have been buying gamma-y calls on long bonds (ZB and ZN) on the other side just in case we get some surprise dovishness from the central bankers. Have a great weekend.
thanks for the feedback and sharing your views Rupert. i agree...and tried to communicate that my core view remains weaker/lower as we still have a number of issues to resolve. i think holding Dec low strike puts makes sense...i simply think there are decent odds we will get to add to that position at better prices sometime in the next 4-6wks. its an uncomfortable position to be in...but feel its important to try to stay true to the data and do my best to avoid letting emotions dictate my trading decisions. incredibly difficult time...a break or bounce moment
I’ve had the same feeling for a week and I’ve been positioning for it since. May be wrong, but I like the odds. I’m overall bearish as well and will be watching the price structure/levels/economic statistics closely while long. It just feels right (and DXY seemed so overbought).
Extremely well-written. Much appreciated. And thanks for the reassurance. I feel less out on a limb.
Curious if you’ve looked at how seasonality varies in years with down markets. Combination of EPS revisions and tax loss selling in coming months are on my mind, but I doubt I’m terribly innovative with that thinking. I remember too many years where it seemed like markets were weak into year-end for no apparent reason, and wondering how big tax loss selling was as a driver. Also the reality that some institutional investors mark their books at the end of October.
thanks Stephen. the factors you mention of tax loss selling and Oct year end for many mutual funds are true every year. i mention above that i think tax loss selling came a bit early this year (i.e. part of Sept sell off)...its a judgement call, but why wait for crappy 3Q earnings season to sell something you are selling anyway? if you study the seasonality table above you will see that Oct and 4Q seasonality tends to be a little better in down years thru Sept
Is the countertrend rally over?
no, i don’t think so. organizing thoughts and will send something around tonight on it…and then some
Thank you. You are a star!
Thank you for a very clearly laid thesis for a bounce. Do you consider consider volatility premiums and discounts in your shorter analysis? Why/why not? Thanks a ton for this.
you mean do i consider volatility in my short term trade views? yes, but generally find that delta is >80% of the trade outcome. there will always be a trade structure that could have made you more money for a given outcome, but you need to weigh that against probability of gain and other circumstances. in this case, i chose short dated call spread to reflect the view for higher stock prices, but mitigate somewhat volatility exposure.
in hindsight i could have done some on 10/14 expiry and some on 10/31 expiry to optimize the view...but try to reduce complexity in views and leave some of the creativity up to the reader.
Are you thinking of creating a model portfolio?
no not at this time. range of risk tolerances, experience and access to wide to have a model portfolio that truly reflects my opinion. i think more effective to provide framework, indicators and relationships people can incorporate into their own work and along they way flag some trades that have broad appeal
Another great call. Your analysis is undoubtedly amazing
thanks for the feedback erik. lets see how it evolves but seems the data was indicating some kind of washout. always hard to know w/ conviction how far these moves go given weak fundamental conditions but nice start
Fantastic call, I'm gutted this went to my junk & didn't get on my radar until reading Harkster on Monday morning. Thank you as ever Mr Blonde.
junk...well hopefully i've been upgraded since then. personally i think of my stuff as at least AA rated quality ;)
Always great to read your insights / view. Thank you for providing such valuable content.
thx for taking the time to provide feedback.
Thank you for the excellent report. First time to stumble on your reports. Signed up immediately!
thanks for feedback, welcome
Always superb way of thinking and great objective insights, thanks for your work
Your note comes at a perfect time for me as I too am struggling with the extreme bearishness vs. potential for bounce. Could we get a market crash from here? Possible, but more likely we get the counter-trend rally that puts market participants off-sides, again.
Thank you Mr. Blonde!
thank you for the feedback and sharing your perspective. very difficult, uncomfortable time...a bounce or break moment. i'm totally open to the idea that we go a bit lower first, but think we are increasingly vulnerable to a piece of good news or headline that catches late shorts and underweights flatfooted at a time of year when many are pnl sensitive...so an up move would hit people at a tough time. complicated. i remain of the view we are in bearish trend, but took out some insurance on the possibility of a sharp, short term up move.
Thanks for the helpful perspective. I appreciate the work you do, and the balanced presentation.
thank you for the feedback. openly sharing views, especially when uncomfortable, is not easy...glad you appreciate the effort
great informative data driven approach as always, love it ... keep it rocking & take care, cheers!
This is exceptionally good. Many thanks for your observations. Do you have a premium (paid) product?
thanks for the feedback JJ, much appreciated. no premium paid product at this stage, but this substack will likely have a paywall soon
Thanks Mr Blonde. Respect your views and so this was NOT the note I wanted to read! I did in fact scale out/ trim of some single stock shorts/puts (SOXX, UBER) this week but promised myself not to get shaken out of my core NQ 11k Dec puts. Have been buying gamma-y calls on long bonds (ZB and ZN) on the other side just in case we get some surprise dovishness from the central bankers. Have a great weekend.
thanks for the feedback and sharing your views Rupert. i agree...and tried to communicate that my core view remains weaker/lower as we still have a number of issues to resolve. i think holding Dec low strike puts makes sense...i simply think there are decent odds we will get to add to that position at better prices sometime in the next 4-6wks. its an uncomfortable position to be in...but feel its important to try to stay true to the data and do my best to avoid letting emotions dictate my trading decisions. incredibly difficult time...a break or bounce moment
Thanks. Don’t worry. Your core view was super clearly laid out. Just hate these ‘break or bounce’ moments too!
I’ve had the same feeling for a week and I’ve been positioning for it since. May be wrong, but I like the odds. I’m overall bearish as well and will be watching the price structure/levels/economic statistics closely while long. It just feels right (and DXY seemed so overbought).
Extremely well-written. Much appreciated. And thanks for the reassurance. I feel less out on a limb.
Thanks. Great insights.