Diary of a Shrub Operator: 21 Nov 2023

Happy AI Day!

Wishing a happy NVDA day to those who celebrate! I can’t wait for results tonight, where I will hear AIAIAIAIAIAIAIAI until my brain turns to brAIn (sorry for the dad joke, it’s what you have to put up with on this blog).

Speaking to a few smart folks, they are all too scared to hedge / short the market before NVDA results. Do with that information what you will. Maybe ask your taxi driver or your local barber and report back to me.

I thought I’d flood you with some charts while we are waiting for the glorious revelation of yet another monster beat.

Below is the chart of the Nasdaq ETF, QQQ, shown with nice weekly candles and the 30 weekly moving average. A few simple obervations:

• The trend is up

• Zoom to today and there’s 4 nice bullish candles BUT they are getting smaller. The first one was the Yellen candle, then the Powell candle, then the Fomo candle, then the … monkey candle?

• Now look at December 2021, which was the most reckless investing period since 2000. The QQQ had peaked end of November, and chopped into year end until reality hit the monkeys in 2022.

• And while we are at it, worth noting that we are only 3% away from the most reckless investing period since 2000. But AI bro!

Caveat: In reality, the progress we have done as humanity in the fields of AI, Medicine and Biotech is that period of time is amazing and it pays to be bullish humanity! But we are just drawing squiggly lines here so back to the regular scheduled program.

“EveRyOnE iS BeAriSh!”

“Shrub, everyone is bearish…” , I hear you say.

Lets look at a few datapoints then.

QQQ Shares Outstanding

This is a chart of the shares outstanding of the Nasdaq QQQ ETF. Basically, when someone buys the ETF, it creates new shares, so I’ll use it as a proxy for positioning. It’s at the highest level … ever, exceeding the Xmas 2022 level. And last week was also one of the largest weekly inflows in history for the QQQ ETF!! Everyone is sooooooo bearish ;)

Put / Call Ratio

Put / Call ratio is at 0.53x … I guess everyone is waiting for NVDA results before buying protection, or everyone believes in Santa so much that they feel they don’t need protection. Why would they, with the VIX at … <checks screen> … 13 !!!! (that was a joke, a VIX of 13 means that protection is very cheap. Just making sure that my joke didn’t get lost in translation!)

CTAs

I really hate looking at CTA positioning as it’s such a black box, but anyway.

Wall Street loves to tell us when the CTAs are short.

Well, now they are kinda long (as per GS), having just brought the most US stocks in 10-day period on record! (CTAs bought $70bn of US equities in November, the largest 10 day buying on record)

Ok, enough bear stuff. Lets lay out the positives:

a) The most positive item is that Yellen is out of control and she’s printing Bills like Zimbabwe only dreamed of. And what Janet wants, Janet gets. Never forget that.

b) The other positive is that Inflation is falling and the US10yr really wants to go back to 4.00% . The key question is whether it gets to 4% due to a soft landing or due to a hard landing. That’s what will determine whether the SPX will be at 4000 or 4444 next year.

I’ll do some stupid Mafs on the next chart so bear with me (If you are mafs-illiterate you can skip this section):

• The NDX added about 2,000 points from the lows when the US10yr dropped from 5% to 4.4%

• So if the US10yr drops to 4.00% , then that gives another 1,333 points of upside to the NDX and a 17,360 target give or take. That’s an +8.3% upside from today.

  (of course, this mafs is nonsensical but it’s still a better analysis than 99% of Wall Street analysis so give me a break!)

And now lets finish how we started, with the mega-Chart on QQQ.

The Bears will be seeing a Double Top formation.

The Bulls will be seeing a Breakout to the Moon.

And the Shrubs are probably thinking: “Why not both?”

Good luck to all, you are going to need it!

Disclaimer: Nothing here is investment advice, this is the trading blog of a shrub, this is parody, I could be in my parents’ basement trading for all you know, don’t be stupid!