1d ago
【10.16 US stocks. It could be an important day】 Friends, don't be distracted by the movement of gold. Today's gold movement is actually not important. The most important thing today is the sharp drop of $kre! And the sentiment from its plunge is affecting the overall market's decline. Today's focus is solely on this! Gold is just a side note! ... Let's gather some attention, can this post get over 100 likes? I'll continue analyzing if it does. Hahaha.
The sharp drop in $kre today is due to two regional banks, $wal and $zion, being scammed out of tens of millions by the same fraudster, which is actually quite a small amount. However, today's news, combined with last month's auto industry loan crisis and yesterday's comments from JPMorgan CEO Jamie Dimon saying that in the private lending sector, "if one cockroach appears, there may not be just one"—these three factors combined have raised market concerns about credit issues, leading to a significant drop in $kre.
But actually, before today, the stock prices of financial institutions with exposure to private credit have been falling for almost two weeks. For example, $arcc $owl. After a hard-won rebound in recent days, they have significantly dropped again today. Meanwhile, the spread on junk loans has gradually rebounded recently, and the yield on junk loans is also showing an upward trend (with $hyg declining)... So these matters, I believe, indicate "undercurrents" all pointing to the credit sector (3)
But the most interesting thing is, aren't we currently in a "rate cut" cycle? Isn't the market currently narrating a "rate cut" story? Why does the "credit sector" seem vaguely uneasy? I believe there is a significant misunderstanding among Twitter users: the market's narrative about rate cuts didn't just start now; it began after Powell's Jackson Hole meeting on August 22. This narrative has been ongoing for almost 2 months. The market seems to be turning the page, preparing for a new narrative. (4)
Today, while bank stocks plummeted, government bond yields also fell sharply, closing below 4% for the first time in months! I feel this is evidence that the narrative is shifting. From what I observe now, the new narrative is vaguely about "stagflation." In other words, my current positions are based on this expectation, rather than any narrative about "interest rate cuts." (5)
The so-called "stagflation" narrative refers to economic slowdown accompanied by rising inflation. Therefore, my largest position is shorting oil stocks $xop — this is the sector that best reflects economic slowdown. Some may ask, isn't inflation also reflected in it? No. Currently, there is no inflation in commodities; inflation is mainly reflected in services. What I mean is that inflation is accelerating, but oil prices will still fall or remain low.
From the perspective of the U.S. stock market, the current risks include:
1. If the China-U.S. negotiations do not go smoothly
2. If the U.S. government shutdown lasts too long, its negative impacts will emerge
3. Will there be continued credit defaults?
4. Has quantitative capital shifted to a bearish stance?
5. How are the tech stock earnings reports? With such good earnings from $tsm, why did it still drop?
These compounded risks make me hesitant to go long in the short term, or I only want to go long in defensive sectors (7)
If I said that starting in October, my trading strategy was to "go long on defensive stocks and short on momentum stocks," now I am basically doing "a little long on defensive stocks and trying to short U.S. stocks as much as possible"—I can't be bothered to pick anymore, just shorting the U.S. stock market index $spy directly. This is my second largest position after shorting $xop. (8)
I shorted gold purely as a target for shorting "momentum stocks." I believe there is a very high probability that gold will crash in October (within 2 weeks). Therefore, shorting gold is my third largest short position. I might directly short $gld or also short gold miners $gdx. In terms of swing trading, I have a strong conviction about shorting gold. (9)
To summarize, today's market has a "grim" trend. I believe that even if you are not shorting, you should at least stay calm and arrange your positions properly. Don't really believe the story when it's almost over. The three major stories, like gold, uranium stocks (nuclear energy), and quantum computing, are already nearing their conclusion. (end)
Oh, just to add, my "long-term position" has been adjusted and refined due to strategy changes: I have already closed my long position on $pypl today, and regardless of whether it goes up or down tomorrow, I am ready to close $nvo. So my long-term position will only have 3 assets: long on $pep and $wu, and short on $hyg.
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