What Goes Up...

Estimated read time: 2 minutes and 27 seconds

In this week’s newsletter:

1. Market recap

2. Skills & data used this week

3. Top holdings: what am I buying & selling

What Happened This Week

YTD returns:

• S&P 500: -21.25%

• Nasdaq: -30.59%

• Russell 2000: -22.33%

• Top holding position US Dollar ($UUP): +17.44%

Ah yes, earnings season...

Crisp fall air, football on the TV, CEOs spewing bull **** about the future of their company. Does it get any better?

Let's remember one thing - most companies guided DOWN heading into this earnings season.

So when a company has "better than expected" earnings, did they actually? 

That's like saying a golfer who has never broken 100 will do so in the next few months but they will be playing from the ladies tees. We shouldn't be surprised if they "do better than expected"...

Companies will twist and manipulate their numbers to make them seem bigger (lol, get it?) than they actually are.

Could you imagine what would happen if a company guided down more than once...

...CEOs are probably smart enough to jump ship before that happens. 

Teaching Moment

Bear market bounces.

What are they and how should we interpret them? At the end of the day they are exactly how it reads.

Bear market = one in which current price is -20% from it's peak (newsflash, we're in one)

Bounce = short-term, upward movements that are followed by a decline

Sure, when you bounce a ball it goes up...but what goes up must come down. And in bear markets, it always comes down.

Shoutout to the group at Hedgeye for providing world class context left and right (current year data captured as of August this year during the last "bounce").

Let's contextualize this:

• For 2000, the average up move was +15% and the average down move was -18%.

• For 2008, the average up move was +12% and the average down move was -19%.

• For the current market, the average up move is +9% and the average down move is -12%

In case math isn't your strong suit, you would need the up moves to be > than the down moves to actually make money on the long side of your investments....

So go ahead, rejoice a little when the market has 10%+ rallies. But they don't mean jack **** if you aren't selling and they inevitably move lower as bear markets progress. 

Because what goes up, must come down (in bear market).

In The Account | my top holdings 

1. $UUP - US DOLLAR

   1. Did you know that there's a -0.92 correlation between the S&P 500 and the US Dollar over the past month? S&P has been down 16 of the last 23 days....HMMMM

   2. That means the Dollar has been going up, but you already knew that

2. CASH

   1. Sitting there. Doing nothing. Because that's what you do in bear markets.

On The Radar | positions I want to build / sizing up

1. NONE

   1. VIX remains >30 which means I remain a buyer of nothing

Off The Grid | removed positions / short selling opportunities

1. TECH - $XLK, $QQQ

2. FINANCIALS - $XLF, $KRE

3. BASIC MATERIALS - $XLB

4. INDUSTRIALS - $XLI (new)

5. RETAIL - $XRT

6. HIGH BETA - $SPHB

7. CRYPTO - $BITO, $MSTR

Until next week....

-BW

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.