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Monthly rollup | October 2023

Stocks Mentioned: General Mills (GIS), Nutrien (NTR), CF Industries (CF) and Mosaic (MOS), Israel Chemicals (ICL), Northern Oil and Gas (NOG), B&G Foods (BGS), SPDR S&P Biotech ETF (XBI), Synopsys, Inc. (SNPS), Costamare (CMRE), Stronghold Digital (SDIG), NVIDIA Corporation (NVDA), Grayscale Bitcoin Trust (GBTC), Lam Research (LRCX), Super Micro Computer (SMCI), Datadog (DDOG)

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Monthly rollup - October 2023
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October 02 2023

All of the Magnificient Seven are having an up day even though the overall S&P 500 is down 0.7%. There is extreme selling pressure in the market, but you wouldn't know it by looking at the indices. A crash in October is looking increasingly likely.

Second time we got stopped out of General Mills (GIS). Staples and utilities can't get a bid even though the recession is now clearly on the horizon. I guess the new safety trade is 500 PE tech stocks with declining revenues.

Sell the GSCI commodity index ETF (GSG) at $21.44 for a gain of 2.5%.

This trade worked wonderfully, catching the rebound in inflation that I foresaw back in April. Unfortunately, I left it a couple of days too late on the sell signal, thus giving back most of the gains.

October 09 2023

October 10 2023

Knee-jerk non-thinking: the media says there's a terrorist group named Hamas attacking the state of Israel and killing Jews. The media says Hamas bad, Israel good. Let's feel sorry for the Israelis and condemn Hamas.

  • First order thinking: conflict in the Middle East is bullish oil, gold and treasuries.

  • Second order thinking: Israel is a hub for generic pharma, tech VC and innovation. Short Israeli tech stocks listed on the Nasdaq.

  • Third order thinking: buy fertilizer stocks Nutrien (NTR), CF Industries (CF) and Mosaic (MOS).

Why? Israel Chemicals (ICL) is one of the largest companies in Israel. 60% of its raw materials are mined in Israel and 90% of its sales are exports, primarily to Europe. War impacts supply chains and will reduce Israeli fertilizer exports. The companies that stand to benefit most are CF, MOS and NTR, in that order.

You can also buy Yara International (OSE: YAR) if you are so inclined, but I'm sticking with the easy trade and recommending NTR, MOS and CF.

Note that ICL is not rallying with the rest, and for good reason.

Bear rallies following the bursting of the dot com bubble. It looks like the Nasdaq is bubbling again, but that's how it looked multiple times after the dotcom bubble burst. At least now we have low vol up days. And even after today's rally, the Nasdaq is still 6% below the July peak. And breadth continues to deteriorate.

Yes, this market is clearly manipulated using 7 stocks. But the bulls have lost momentum and the games are now obvious. Even the Bank of England is sounding the warning signal on the Magnificient 7 valuation. Apple is worth more than the entire UK stock market, reminiscent of the Nikkei 1990 peak when the Imperial Palace grounds were supposedly worth more than the entire state of California.

Today is probably the last gasp of the bulls before it all blows up.

October 11 2023

Short SMCI at the open today

Buy Northern Oil and Gas (NOG)

If you're familiar with the royalty and streaming model in the gold space, this is something similar in the oil space. NOG takes minority working interests in oil & gas properties, with the operator responsible for all aspects of production and the company remaining a silent partner.

The company is diluting shareholders and raising equity at $38.87 per share. Watch for a dip to or below that level to enter into a position.

This is a long-term trade idea, which means the ideal holding period is few months to 2 years.

11.6% of S&P 500 stocks are above their 50 day moving average while the index as a whole is below the 50 DMA. The MSM makes it appear as if we're in a new bull market, but this is simply untrue. I've been consistently bearish for the last several months because the market has gone nowhere while fundamentals have continued to deteriorate. Nothing changed except news headlines.

The market has gone from truly terrible to slightly less so.

What just happened here?

Maybe news of India's ambitious thermal power policy leaked out. India plans 40% more coal use in thermal power.

Maybe I'm a sucker for consumer staples but so be it. I've tried buying GIS twice and been stopped out. But I've only attempted the B&G Foods (BGS) trade once. So here goes the second attempt.

Buy BGS at $8.35 with a stop at $7 for a risk of 16.2%. A little wider stop this time to give this a chance of working.

The chart doesn't look pretty but just maybe fourth time is the charm.

October 12 2023

Watch for a bottom in biotech (XBI)

New high and a doji on semiconductor stock SNPS. It's a short if it closes below $490 tomorrow.

October 13 2023

Costamare (CMRE) is among the rare shipping stocks that looks bullish

Welcome to the party Mr. Ingot.

October 14 2023

Band squeeze setup in bitcoin miner Stronghold Digital (SDIG)

October 17 2023

Head and shoulders top pattern followed by a gap down. NVDA is reacting to deteriorating fundamentals. Buying a 120 PE stock and hyping it up is beginning to blow up in the AI hype believers' faces.

October 19 2023

According to Powell, inflation is still too high.

But a winner of the Swedish central bank prize in economics in memory of Alfred Nobel (not a Nobel prize) thinks the war on inflation is over. As long as you live in an ivory tower, travel in a chauffeured limo, and are too rich to bother about living expenses.

October 20 2023

Avoid buying bitcoin for now

There's a lot of hype going on about the SEC approving a spot bitcoin ETF and how that's bullish for the price. The opposite is true. If Grayscale Bitcoin Trust (GBTC) is approved for conversion into an ETF, 90-100% of GBTC holders will choose to redeem shares for bitcoin. By doing so, they make a fat profit and will sell their bitcoin to lock in those gains. GBTC holders are mostly TradFi folks; they are sick of bitcoin and sick of holding on to a product that has traded at a discount to bitcoin for nearly 2 years.

An ETF approval will lead to bitcoin getting dumped on the market, at a time of already low liquidity.

Second reason to avoid bitcoin: the market always buys the rumour and sells the fact. The money has already been made on this trade. Why do you think the mainstream media is giving it so much attention? The big traders are feeding these stories in order to create exit liquidity for when they unwind their trade.

Third reason to avoid bitcoin: the market is being actively manipulated. CoinTelegraph pumped the price up by posting fake news of ETF approval, killing shorts and getting the SEC to issue a statement cautioning investors about the fake news. The SEC has always expressed skepticism about allowing a spot bitcoin ETF precisely because it feels the market will be manipulated. Now it has proof of manipulation. The chances of a spot bitcoin ETF being approved went down to near zero.

Why avoid, why not short?

There is no volume, which means you're going to get wild swings that take out traders on both sides. It's the reason traders got away with market manipulation in the first place. Trading volume is down over 90% in the last year, which makes crypto effectively illiquid and prone to wild moves.

As with the Magnificient 7, crypto investors have hidden out in bitcoin and ethereum to ride the bear market. Ethereum has fallen; bitcoin will be next. This is all happening against a macro backdrop that's highly inflationary, with the Fed tightening financial conditions and actively draining liquidity. This is not the money printer go brrr environment that creates crypto bull markets. Stay cautious and on the sidelines.

October 22 2023

October 23 2023

October 24 2023

Short Lam Research (LRCX)

Lam derives 48% of its revenue from China. The Biden admin's move to wage war against the Chinese semiconductor industry is going to see retaliation. Banning iPhones for government employees is only the first salvo. Lam has already faced restrictions on the equipment it can export to China. This will only get worse. With underwhelming Q3 results out of the way, the bulls have no excuse for attempting a rally. The primary trend is down, the stock is fundamentally overvalued at nearly 10x book.

This is a high conviction short for me, similar to NVDA and SMCI.

October 25 2023

October 26 2023

This marks an 8 month round trip in the S&P. Bulls have been made miserable in the last 4 months, bears have been made miserable over this entire period with the constant onslaught of generative AI driving a bubble in the Magnificient 7.

What now? The Magnificient 7 is no more. Google and Tesla gapped down on earnings. Meta appears to be headed for the same fate. Microsoft gapped up but looks about to give up all those gains. Nvidia is still holding above support but that looks like it will give way too.

Amazon and Apple are already looking weak. Apple is going to have 4 down quarters in a row. By now, even the Swiss National Bank would have figured out that backing the CHF with Apple shares is a bad idea.

Everyone knew the Mag 7 and AI was a bubble. Everyone participated nonetheless. Because there was no alternative. Now that the music has stopped, everyone's rushing to sell at the same time. Only, there are no bids because the shorts have been creamed and have avoided the Nasdaq bubble stocks. When everyone knows everyone knows it's time to sell, good luck getting bids.

If this price action in a trillion dollar company is unusual, it's because this entire bubble was unusual in every way. My base case is now a re-test of last October's lows.

The Russell 2000 is nearly there already.

I sold my Datadog (DDOG) puts yesterday but I'm now short the stock. Given that I have a large put portfolio, I think it's prudent to start taking profts pre-maturely. I still have plenty of short exposure.

My thinking on the crypto bubble hasn't changed. I'm still not trading it long or short.

"I have to do my own seeing and my own thinking. But I can tell you after the market began to go my way I felt for the first time in my life that I had allies -- the strongest and truest in the world: underlying conditions. They were helping me with all their might. Perhaps they were a trifle slow at times in bringing up the reserves, but they were dependable, provided I did not get too impatient. I was not pitting my tape-reading knack or my hunches against chance. The inexorable logic of events was making money for me. The thing was to be right; to know it and to act accordingly. General conditions, my true allies, said "Down!" and Reading disregarded the command. It was an insult to us. It began to annoy me to see Reading [a blue chip stock] holding firmly, as though everything were serene. It ought to be the best short sale in the entire list because it had not gone down and the pool was carrying a lot of stock that it would not be able to carry when the money stringency grew more pronounced. Some day the bankers' friends would fare no better than the friendless public. The stock must go with the others. If Reading didn't decline, then my theory was wrong; I was wrong; facts were wrong; logic was wrong.

I figured that the price held because the Street was afraid to sell it. So one day I gave to two brokers each an order to sell four thousand shares, at the same time. You ought to have seen that cornered stock, that it was sure suicide to go short of, take a headlong dive when those competitive orders struck it. I let 'em have a few thousand more. The price was 111 when I started selling it. Within a few minutes I took in my entire short line at 92.

I had a wonderful time after that, and in February of 1907 I cleaned up".

- Jesse Livermore (Reminiscences of a Stock Operator)

Watching the Magnificent 7 go down, I can fully appreciate the sentiment expressed in the above quote.

October 27 2023

Buy shipping company Costamare (CMRE)

The company reports earnings on Wednesday. Note that volatility and trading volume have absolutely collapsed on both the daily and weekly timeframe. It's like nobody cares.

A beat should get the algos all riled up and bring back buying volume. The environment has been bad for the company's business for a long while now, so the sellers should already be out. That explains the lack of volume - no interested buyers, selling has dried up, and the stock is just plugging along in a smooth downtrend.

No stop loss since this is a low volatility stock. I'll update after earnings.

The gap fill back to $300 on Nvidia (NVDA) is looking highly likely in the next couple of weeks.

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