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Watchlist 15th March 2022

The markets continue to head lower as we edge closer to the fed meeting on Wednesday. QQQ broke a significant level ($318) which was the previous low and this morning we continue to gap down and head lower.

An ever growing number of names are now reaching technical extension levels which they respected in previous crashes such as 2020, 2018, 2008 etc. Meaning the chance for a relief bounce today or tomorrow is very likely.

Every time we crash and enter into a bearish market investors always come to the conclusion that this is the end. This is the time the market self implodes.

Here’s where we’re currently at:

Most of the non cash generation shit boxes are already down 80-90% from highs. So that correction Is already complete.

Most of the companies which are “good to great” are down 40-60% from highs and heading straight for our past pre covid prices; whilst growing their revenues 50-100% during the same period. Meaning their current valuation is even cheaper than it seems.

Most of the “blue chips” are down 20-30% from highs.

No matter how dire the situation is it’s important to note we’ve already sold off tremendously.

People continue to look at the market as a whole and feel we MUST head lower. I mean there’s a war, high inflation, supply shortages, Biden woke up and said something, the list goes on. Whilst all this is very true, the S&P 500 does not paint a clear picture of just how much we’ve already pulled back.

Why?

The answer is very simple.

Most of the Tech names, growth names and speculation names were trading at insane multiples. Multiples which were unsustainable. Whilst these names were being chased, the boomer names and value names were being left in the dust. Creating a huge gap between the two. This meant that the value names were getting cheaper and the speculation names more expensive.

As the former sold off investors rushed to stocks which they classed as “safe havens” thereby propping up the S&P 500 in the meantime, as money flows from one sector to another. Some of these undervalued names now sit at fair value whilst some are overbought; nothing too extreme though in my opinion.

We’re now seeing some sectors like semi conductors and many others at cheap levels irrespective of inflation numbers, levels which are nearly too cheap not too buy. We then have sectors like healthcare trying to breakout. This means it will only get more and more difficult for the market to sell off.

When then have large money selling off all their “risk off” assets such as Gold, Silver and many commodities.

This sell of started just days before the lead up to the fed meeting which everybody fears:

What’s interesting as this indicates large institutional money is moving out of these assets in order to build cash. Meaning most don’t believe the same hype they’re spilling to the public (what a surprise).

We then have press releases (paid press releases) being issued stating how most of the dip recently is retail. As they pump in $8 billion into the stock market, the articles are worded as though it’s dumb retail propping the market up, indicating that we’re going so much lower the moment smart money “sells out”.

Now firstly $8 billion does absolutely fucking nothing, below is a summary of the amount traded across the Nasdaq daily.

So you’re telling me that the market has been trading an average of $265,000,000,000 a day and a measly $8,000,000,000 is the reason we’ve held these regions. Now I swore off drugs a long time ago and it’s a good thing I did, otherwise I’d believe this absolute nonsense.

One of the most common phrases I see on the internet right now is “we’ve only pulled back one year”. Those same people were screaming and shouting about how they missed the Covid buying opportunity. I’m not kidding, I follow a lot of people because they’re unaware of their comical traits.

Let’s take a look at the sell off from 2020 when famous investor Bill Ackman told us hell was coming and we we’re going back to 1929. The entire world shut down, almost every business for the first time in history was unable to operate. A economic disaster far greater than a war. Now we started this sell off on 20th Feb 2020 and reached a low on 23rd March 2020. The same day the UK and other countries witnessed their greatest fear come true, lockdown. During that horrendous crash we pulled back a staggering, eye-watering, yeetifying… one year.

Now since the 20th February 2020 growth numbers across many industries have boomed. With one of the fast growing sectors semi conductors.

Here are some numbers for comparison:

$AMD

March 2020 revenue: $1.78b Eps: $0.18

December 2021 revenue: $4.82b Eps: $0.92

$MU

March 2020 revenue: $4.79b Eps: $0.45

December 2021 revenue: $7.68b Eps: $2.16

$QCOM:

March 2020 revenue: $5.2b Eps: $1.09

December 2021 revenue: $7.68b Eps: $3.23

So what’s my point?

Many investors are acting like there hasn’t even been a crash yet. Many are acting as though growth numbers have got worse when in fact they’ve got better. Many are acting like this is just the start of the flush.

I’m literally sat here with practically everybody I know bearish and not only bearish but short. From great traders to degenerates on WSB. Everybody is shorting the hell out of the market and it’s feeling euphoric; too the short side.

Meanwhile most solid companies which will no doubt be here to stay have shed 40-50% of their valuations putting their stock prices back to 2020 levels whilst their income has doubled and some.

Below are the charts of some of the biggest runners and expected growth names from the 2020 bull run… Enjoy.

So what’s my point?

Statistically in the short term we bounce here due to over extension to the downside.

Fundamentally a lot of names are cheap here regardless of inflation.

The majority of “shit” companies have already sold off meaning only the strongest are left standing.

I’m not shorting the strongest names in the market, fuck that.

I’ll be focused on long positions moving forward and If I don’t see any I’ll sit out.

When I got out for a meal I like to eat a big steak, blue cheese sauce, a side of fries, a bottle of red and sample the entire desert menu. What I don’t like to do is rummage through the bin looking for scraps.

When everybody is bearish for me it’s time to turn bullish as then I’ll be ready for when the tide turns.