Long squeeze

Below was the note I sent to my chat groups about the GME saga:

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Right now we're seeing an epic short squeeze ongoing. But very soon that may start any moment, we'll see an equally epic "long squeeze" to start, which will be just as brutal. How can it be? Here is the theory behind it (I copied it from someone else' writing).

"Think about a crowded theatre. At the moment, everyone is going into the theatre (buying), and no one is selling. However, when they begin to try and sell their positions, no one will be there to buy from them.

Such is the equivalent of yelling "fire." The smart ones will get out early. The rest will find themselves scrambling towards a very narrow exit. Once the price starts falling, the sellers will swamp the buyers driving the price lower. In Gamestops case, given the company's value is around $10, where it was trading before the mania, the decline will be both brutal and fast."

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I don't know if the "long squeeze" has already started but the past two days of harsh selloff indeed smells like it. See the waterfall of GME after the haircut of the past two days:

I genuinely hope no Reddit kids will get hurt by this long squeeze but it may be just wishful thinking. Likely there will be many who will badly hurt by the emotional FOMO, which in general will never end well. At least I wholeheartedly wish there will be no tragedy at the end but just a lesson learned from the frenzy high chasers! 

For anyone who has unfortunately got in at its peak area or his/her family members who did so, here is my advice:

Purely from the TA perspective, there is a chance (no guarantee) that GME may try to mount another attempt of rally in the next day or two but if this happens, it will probably won't go above its major overhead resistance around $150ish. So taking any rebound as a luck to unload your long position to cut your loss. Seriously, don't try to hold it up wishing some magic will happen to save you. More than likely, those holding it up will get killed with the fund wiped out mostly if not all!   😢

PS:

I have registered as 深山老林 at SafeChat (SC) (You need to download the SafeChat app first) and have set up a new SC chat group. I'm gradually shifting our major social media interactions to SC instead of WC. If you'd like to join my group, sign up a free SC account easily and search for me and connect me as friends.  For friends sharing  similar conservatism views, let's come together to form a better chatting group that won't be constantly disturbed and harassed by the insane radical censorship!

A profit I was not asking for.....

As I said, I had a couple of trades last week targeting SPY that would not decline below $370 and $365. Well, it was really close but indeed it didn't break down below as SPY closed on Friday at $370.07. Normally my put selling should expire worthless with a strike of $370 but something unexpected has happened over the weekend: to my surprise, one of my put sellings got assigned at $370. Since my position size was relatively big as I was using the bullish put spread, I got a margin call due to it. It was a bit scary situation as I didn't know how the market would perform today. But as I have also said, technically speaking, last week was quite brutal for the market and had been quite significantly oversold, I was expecting a revenging rebound for this week although I had no clue if this would immediately start today. Well lucky me that the market indeed shot up quite higher at opening, allowing me to offload my SPY shares with a great unexpected profit (nearly $8000) that was not I had planned for. Thank you, whoever exercised my puts that virtually just sent me an awesome weekend gift that made my day for a great start of the week!! 😜

How is a melt-up progressing?

Since I have been constantly talking bearish recently, I'm sure a lot of folks must believe I'm kind of a perpetual bear. If you think so, you surely haven't seen my wildly bullish calls. Want an example? Have you seen my crazy bullish call at the darkest hours at the end of 2018? See here: A 20% jump in 2019

As a matter of fact, I'm a swing trader but generally going against the popular views for a given time. Indeed I'm quite bearish in general for now and therefore keep talking bearishly. However, it does not mean I think the market will crash and simply go down for long. Far from it. Actually I'm a big believer in an ongoing MeltUp market that may reach its ultimate top this year or next year. Having said that, it does not mean we won't see some big selloffs on the way. If history is any guide, we had witnessed numerous times of big plunge of the market during the dot.com MeltUp. See the chart below for Nasdaq for the last two years of the bubble period.  The Nasdaq crashed by roughly 10% five times on the way to its final dot-com era peak. So regardless how bullish one can be, we must honor the simple fact that Melt Ups come with volatility and wild ups and downs.  

 Believe or not, even within the time like now that I'm bearish overall, I have still been doing bullish trades from time to time. For this week, I have got two bullish trades for S&P via SPY, betting it wouldn't crash below $370/$365 by selling puts. Both ended with full profits although it was quite a bad week for the market! For today, I told my DW Family that I even expect some revenging bounce early next week and we made a trade to bet VXX will fade fast with it.  Let's see how it goes next week!😇 

PS:

I have registered as 深山老林 at SafeChat (SC) (You need to download the SafeChat app first) and have set up a new SC chat group. I'm gradually shifting our major social media interactions to SC instead of WC. If you'd like to join my group, sign up a free SC account easily and search for me and connect me as friends.  For friends sharing  similar conservatism views, let's come together to form a better chatting group that won't be constantly disturbed and harassed by the insane radical censorship!

Can they go down to zero?

The craze for GME is continuing to be even more crazy every day. It shot up to almost $400 at opening today! Can it go up to $1000? Sure it can as there is no logic that can explain anything that is going on except the crazy FOMOs plus the bloodbath short squeeze!😵

Really scary what is going on as we'll likely see another horrible  massacre that is doomed to follow that may kill a lot more naive FOMOs😢 We have already seen a young college student who killed himself a few months ago due to a big loss from his crazy FOMO trading. I hope we won't hear more such tragedies in the days and weeks ahead.

 It is a certainty that those value-wise worthless stocks like GME/AMC etc will crash at some point, not if but just when. We saw a similar craze last year and the famed retired hedge fund manager,  Whitney Tilson posted a note below about those FOMO stocks that were pushed to moon, followed by decimated crashes in just a few weeks' time. See below his note back then,  forwarded by my friend. He is making the same call for the currently short-squeezed stocks. Let's see in a month how this saga goes!   

Here's a funny video from 2014 that's just as true today: Buy the Dip.  

The bubble over the past week in bankrupt (or near-bankrupt) stocks may be the craziest thing I've seen since the Internet bubble.

Take a look at the gains in these stocks yesterday:

• Extraction Oil & Gas (XOG): 248%
• Chesapeake Energy (CHK): 182%
• Noble (NE): 161%
• Whiting Petroleum (WLL): 152%
• Valaris (VAL): 135%
• Hertz Global (HTZ): 115%
• J.C. Penney (JCPNQ): 96%
• RTW Retailwinds (RTW): 74%

Every one of these stocks isn't just likely to decline… they're all ZEROS!

This insanity is being driven by individual investors day trading and speculating like crazy…

It saddens me to see this because while this bubble (so far, anyway) remains microscopic in size, it's still a few billion dollars that these investors are sure to lose – and I suspect these are losses these folks can't afford during these tough times…

In a little more than five weeks since then, this bubble has completely burst… These stocks are down an average of 74%, as you can see in this table:

Company	June 8 Closing Price	Yesterday's Closing Price	Percent Change
Extraction Oil & Gas (XOGAQ)	$1.48	$0.15	-90%
Chesapeake Energy (CHKAQ)	$69.92	$6.60	-91%
Noble (NE)	$0.73	$0.28	-62%
Whiting Petroleum (WLL)	$3.48	$1.08	-69%
Valaris (VAL)	$2.19	$0.63	-71%
Hertz Global (HTZ)	$5.53	$1.44	-74%
J.C. Penney (JCPNQ)	$0.63	$0.27	-57%
RTW Retailwinds (RTWIQ)	$0.41	$0.09	-78%

                  
Don't be tempted to bottom-fish here – as I wrote on June 9, these stocks are all ZEROS!

PS:

I have registered as 深山老林 at SafeChat (SC) (You need to download the SafeChat app first) and have set up a new SC chat group. I'm gradually shifting our major social media interactions to SC instead of WC. If you'd like to join my group, sign up a free SC account easily and search for me and connect me as friends.  For friends sharing  similar conservatism views, let's come together to form a better chatting group that won't be constantly disturbed and harassed by the insane radical censorship!

We saw this when S&P lost 400 points in a month

We saw this setup last August when S&P was up 300 points in the month, pretty good Um?

It then lost 400 points in September! Ouch!!

Will we see the same gyration again this time? Just watch😇

Per SentimenTrader:

The S&P hit a high, but most of its stocks are in downtrends

Since markets bottomed last fall, a lot of stocks (and bonds) were rising, and the buying pressure was impressive. That kind of activity tends to lead to longer-term gains.

Shorter-term is a different matter, but even that has led to only inconsistent losses. The biggest issues have come when underlying momentum wanes and we see cracks under the surface.

That's what's happening now.

Relatively few stocks have been rising on days the S&P 500 shows a gain. That difference between advancing and declining stocks has been negative enough that the McClellan Oscillator for the S&P 500 is well below zero. 

It's unusual to see the Oscillator below zero, and especially well below zero, when the index itself closes at a 52-week high. The only time in recent years that it triggered was last August.

The market is repeating the most famous curve ever in history!

Can you recognize the following curve?

If not, you are really stupid or ignorant at least😏! Of course, you are not stupid at all if you are a Marman, not knowing what has happened on the earth in the past few months😜!

This the famous 拜痴曲线 （BidenIdiot curve), the blue one, which tells people how the demented Biden stole the 2020 election to become the fake president! So from now on, in my investing terminology, I got a new term, BidenIdiot Curve (BIC), which basically means anything that shoots up vertically without legitimate reasons. This is my way to pin the Biden idiot and his whole gang onto the Hall of Disgrace (耻辱堂) forever!!  

Now we just got a stock that is showing a perfect  拜痴曲线, and you probably already know which one it is. Yes, the famous GME squeeze run.

You may ask how it is possible that a short squeeze can send a stock higher by hundreds of percent?   

After all, GME is a heavily debt-ladened retail seller of video games and accessories. Most of what the company sells can be purchased online. So, their retail stores are obsolete and unnecessary. And, given the heavy debt load, the company seems destined towards bankruptcy. There is nothing changed with the company. Growth rates aren't expanding. Earnings aren't improving.

Well the sudden gain was purely fueled by a stock market research report that listed the stocks most likely vulnerable to a short squeeze. GME topped the list of the most shorted stocks. And, voila. All that happened was traders jumped into positions in order to squeeze the short sellers to cover their bets. At the peak, GME had 71 million shares shorted, even more than its available floating shares (145% above)! You probably cannot find anything more crazy these days in the market, just like you cannot find any more disgraceful election stealing by the radical Left!!

So here you go: when trading started to level out earlier Monday afternoon at around $80, the stock had retraced much of its big move to $159 and was back to up "just" 23%, but Monday's gain comes on top of a 51% jump on Friday... which follows a 100% gain in the prior week. In fact, the once-left-for-dead retailer is up roughly 325% this year.  And it is up around 31 times from last April's all-time low of $2.57! 

I wish I'm smart enough to ride the idiot curve but I'm anything but smart of course! Just like the famous election fraud that I had no clue at all to even think about it happening, I had no clue that GME could jump like the Biden idiot! Having said that, I still want to try my luck to gain something from this once a century craze: Believe or not, I'm shorting GME now!! Of course by no means I dare to naked short it directly. I'm just shorting it via a special option strategy which has a wide margin of safety built in. My rationale is that after so many days of extreme hyper for GME that has likely squeezed all the shorting souls to death, it should at least cool down a bit. Looks like till now at closing today, I have been wrong but we still have 3 days to go. Anything can happen nowadays! 

I cannot share with you the specifics of my special strategy as it is only reserved for my DW Family members. Will see how it goes. Keep my fingers crossed for the next three trading days😄 

PS:

I have registered as 深山老林 at SafeChat (SC) (You need to download the SafeChat app first) and have set up a new SC chat group. I'm gradually shifting our major social media interactions to SC instead of WC. If you'd like to join my group, sign up a free SC account easily and search for me and connect me as friends.  For friends sharing  similar conservatism views, let's come together to form a better chatting group that won't be constantly disturbed and harassed by the insane radical censorship!

 

My crystal ball working perfectly again!

Last Wed, I posted a note at my chat groups that I believed volatility was going to jump within a week or two. And I said, when it jumped, a 20-50% hike for VIX was common. So people should be cautious.

Actually I was not merely doing the lip services. Rather I put the money where my mouth is: I was literally going long for VIX back then. 

Well, my crystal ball is indeed working perfectly again: VIX catapulted about 25% higher today from 21 to 26 during the day and cooled down a bit by closing. 

This VIX crystal ball is really amazing as it is quite reliable in predicting its moves when at extremes and accordingly the market moves which are usually inversely related. If this is your first time to hear about my crystal ball, please read this blog which provides more details how it works.  

 

We are entering into a period with high volatility that will push VIX up or down quickly. Right now, VIX may likely calm down a bit first before its next leg up. I'm closely watching my crystal ball, waiting for its flashing signal again!😏

PS:

I have registered as 深山老林 at SafeChat (SC) (You need to download the SafeChat app first) and have set up a new SC chat group. I'm gradually shifting our major social media interactions to SC instead of WC. If you'd like to join my group, sign up a free SC account easily and search for me and connect me as friends.  For friends sharing  similar conservatism views, let's come together to form a better chatting group that won't be constantly disturbed and harassed by the insane radical censorship!