Blog – Page 16 – Red Pill Quants

0 The Bear Awakens

If you are new to trading then you may be wondering what all those red candles mean you suddenly keep seeing all over the place. Well, let me tell you a tale of a long forgotten place and time when market corrections were a regular occurrence and served to prevent excessive greed and hubris to prolong for more than mere fleeting moments. The rare times it happened were feared by all but then quickly ignored and soon forgotten nonetheless. This cyclical ebb and flow of the financial markets worked well for a few centuries until one day back on September 15 of 2008 when the Federal Reserve decided that market corrections were a thing of the past and thus henceforth were considered ‘verboten’.

0 Emergency Fed Meeting Survival Guide

It’s finally official: Inflation is out of control with last week’s consumer price index (CPI) reporting a jump to a whopping 7.5%. This is the fastest surge in the past 40 years but let’s not kid ourselves, that is AFTER the numbers have been thoroughly massaged and finagled to look as rosy as possible. The truth is most likely much more dire. I personally would pin running inflation at 10% or perhaps as high as 14% simply judging by fuel prices as well as basic cost of living expenses which continue to explode higher.

0 With A Little Help From Our Friends

When I started this digital den of market domination in early August of 2008 I could not in my wildest dreams have imagined the decade long bull market that would end up grinding even the staunchest of perma-bears into the ground. Of course none of that could have ever happened without a little help from our friends over at the Federal Reserve. The now commonplace axiom of “don’t fight the Fed” had not yet entered our contemporary vernacular and thus many reasoned heads first had to roll before the market embraced a new paradigm driven by quantitative easing and various FOMC operations aimed at painting an infinity-put under the equities market.

0 Get Ready To Rumble

I promised you a turbulent trading week and at least on that front the market did not disappoint. Once it was done punching itself in the face a few brave bulls valiantly stormed into the ring and began to smash the referee with folding chairs. In all the chaos and commotion buyers with deep pockets somehow managed to stage a last hour stick save, pushing the SPX back toward 4,420.

0 Are You Not Entertained!

The third week of January 2022 will be remembered as the moment when Lucy finally was handed her well deserved comeuppance. And when I speak of Lucy I of course mean Jerome Powell and his esteemed colleagues at the FOMC. In other words once the realization of higher interest rates and a veritable avalanche of corporate credit defaults fully set in, the equities market decided to send Powell a clear message ahead of this week’s FOMC announcement.

0 Lucy Van Pelt’s Market

Since early November equities have been stuck in what seems to resemble Lucy Van Pelt’s purgatory of pain. Alongside a marked increase in volatility the SPX managed to heave its battered carcass to new ATHs on January 4th, only to immediately fall back and paint what is now increasingly looking like a topping pattern. The situation is looking serious but I cannot help but think that we’ve all seen this same type of setup all too often over the course of the past two years.

0 Something’s Brewing

You know the old saying – if it looks like a duck, walks like a duck, and quacks like a duck, it’s a donkey. Okay, maybe I got that one mixed up – but that’s the sort of rational thinking we’ve come to expect from the equities market for well over a year now. More specifically as equities crawl their way higher month over month implied volatility continues to range in ‘problem space’ territory.

0 Thar Be Dragons

With the futures down and falling ahead of the Monday open it’s time to take a look at important inflection points that will affect the medium term direction in equities and other correlated markets (crypto increasingly one of them). And as a trader it’s particularly important to determine when one’s bullish or bearish hypothesis meets its make or break point. Fortunately the market has left us with fairly clear clues as to where to ‘draw the line’ literally speaking:

0 What Could Possibly Go Wrong?

If you’ve been missing my weekly updates as of late then you’re not alone. As much as I enjoy to whinge about long hours and a chronic lack of personal time the truth of the matter is that I really enjoy writing these posts. After 13 plus years you’d think I’d eventually run out of material but given the crazy times we all live in not a day passes by that does not warrant a bit of commentary occasionally infused with my notorious teutonic humor. Expressing my views here also helps me to hone and sharpen my own perspective on the market and the approaches I take to stay ahead of the market’s giant slam hammer.

0 More Lumps Of Coal For The Bears

Shoving lumps of coal up the bear’s hindsides has been a long standing EOY tradition, and at least in that respect 2021 did not disappoint. Of course if you happen to live in Europe where energy prices are currently exploding after German regulators – in their infinite wisdom – decided to postpone the certification of Nord Stream 2 to spring next year, then all those coal filled stockings may just get them through the winter without being tarred, feathered, and carried out of town on a rail.

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