Election Volatility - Addendum

"Boy that escalated quickly!"

“Markets crash from oversold conditions, but only if you are long. If you are short, they bounce from oversold conditions. Thems the rules.”

- Le Shrub, from Reminiscences of a Shrub Operator

Good morning Vietnam…er, I meant Shrubstack!

There is no point repeating the warnings about “Election Volatility” in August or about the need to have a high cash balance. The time for warnings is over. What’s done is done. I’ll keep this short and sweet as the comments on Twitter and Mass Media are very unhelpful, especially for less experienced investors / traders / monkeys / shrubs.

To give you an idea, at the time of writing, the Nikkei is -12%, the Nasdaq is -5% but Jim Cramer thinks “we aren’t oversold enough for a real bounce”. This is the same guy who buys 0.5% dips like they are hummus at an all-you-can eat-buffet.

*If you want to have a little fun, read this fake collaboration of a shrub and David Attenborough on analysing the various subspecies of Twitter monkeys.

Lets see what’s going on:

The Nikkei is down 12.4% today and down c.20% in 3 sessions

To give you an idea of how severe this is, in October 1987, the Nikkei was down 15% in one session and down 18% in 3 sessions.

I guess for Cramer the October 1987 crash wasn’t “oversold enough”. LOL!

Now lets turn to the US market, as there were a barrage of negative news this weekend:

• Buffett sold half his Apple stake

• NVDA faces delays on its new chip launch due to design flaws

Too bad that these companies represent 13% of the S&P and 17% of the Nasdaq (we wrote about the casino called Nvidia in “The Nvidia Liquidity Vortex”)

As a result, the S&P futures are now down 9% from their All-Time-Highs, and only 1.4% away from their 200dma, and 3% away from their April lows.

…whereas Nasdaq futures already had an 18% drawdown, broke below their 200dma and are back near their April lows.

Meanwhile the VIX has crossed >35, at the highest level since Covid…

…and they want us to panic now??!!!

Thanks, very unhelpful!

As we have highlighted ad nauseam last week, the best way to survive in August was to have a high cash balance:

“Cash is the Best Hedge”

I’m quite chilled. It’s not the end of the World. This is the Volatility we warned ahead of time. I’m sitting on a 40% cash balance and reviewing opportunities. The word now is: PATIENCE!

APPENDIX:

There is one thing I’m watching here before adding risk: