Speaker 1Hit it. It's Thursday, November 5th, 2026, episode 304. I'm Patrick Ceresna. And I'm Kevin Muir.
Speaker 2This week, it's a special Talking Charts Only with our resident crayon chewer reading the squiggles for us all. But before we start, Patrick, you mentioned you have an options master class next week. What's that all about?
Speaker 1Right. Before we start, I just wanted to give this a quick plug. Next Tuesday, November 10th at 4 p.m. Eastern, I'm going to be starting part one of a four-part series of an options master class. The first session takes apart the Pelosi trades. Everyone always wants to know what they bought. But to me, what's more interesting is the question is why they used options and why they clearly had the money. When they had the money to buy the shares, would they use these options? So I'm going to rebuild the trades live in a simulator, compare them to simply owning the shares. And really kind of assess the risk of the trades and what would happen if they were wrong. So it's a free, no pitch. And I'll be answering questions live. So you can register and it'll cover the whole four-part series. The registration is at bigpicturetrading.com or click on the description below. All right, Kev, why don't you give us a disclaimer, buddy, so we can talk some of these
Speaker 2crazy charts. Nothing in this podcast should be viewed as investment advice. Listeners should consult an investment professional before making any decisions regarding topics. Topics mentioned in this show. Side effects of too much huddle may include the blue wave whiplash syndrome, the AI infrastructure backlash disorder, and the core weave balance sheet
Speaker 1anxiety. All nasty, nasty side effects. All right, let's get to these charts. All right, Kev, you know what? I'm watching here. We're 300 S&P points down almost.
Speaker 2Yeah, we're recording this Thursday at lunchtime.
Speaker 1Exactly. Thursday lunchtime. And, uh, I decided I'm going to drink this beer. It's called hear the silent sirens. Hear the silence. Hear the silence. Hear the sirens. But, uh, you know what? We got to talk these markets because, um, things are, have gotten spicy. And what was crazy was the extraordinary pop and drop that we had from the election results. The first reaction was down. Then by the end of the day, we're up like 140 points back above the 50 day moving average. And then today, uh, the AI stocks just had their feet kicked out from underneath it. So this absolute whipsaw is, uh, is causing all sorts of turmoil. We got to dive in while S&P is down three and a half points and it looks ugly. The really ugly chart is the NASDAQ. The NASDAQ has now broken to a six month low. It's been, it went through a substantial topping formation from May through October, even did a, an infamous, this prairie dog. We actually talked about this prairie dog when the, when the NASDAQ was up there.
Speaker 2It's a noble animal, noble animal, noble animal, the greatest technicals, uh, you know, uh, signal
Speaker 1out there. It is, it is. Uh, and, uh, and after breaking out this breakdown in the NASDAQ, uh, since that, um, uh, October high has now been 30 days of selling down 15%. We're literally a stone throw away from the 20% bear market labor market. We're literally a stone throw away from the 20% bear market. Which I don't really subscribe to that, but that's just a bunch of quants like to use that as their definition of bear markets. But to the fact that we broke to lower lows is the crazy part. What I want to focus on is where is that chaos? And that's the semiconductor index. Look at this down 10%, almost 10% today, uh, at its low. But after that high in October, we have basically seen the semiconductor index slammed 30%. Uh, and that's the crazy part. We're literally a stone throw away in the last 29 days wow right a 30 hammering on the downside uh you know and and so like when you take something like uh a three times leveraged uh semiconductor etf somebody who owned this thing back in june has been hammered 86 from the high by the way patrick
Speaker 2the sentiment the whole way down is being like just bye bye bye bye yeah bye right and they were like bitcoiners like bitcoiners then and not only that when you suggested that it wasn't going as well as you said they they told you the you didn't understand the trade and that you would figure it out and there's going to be seven nine whatever trillion dollars
Speaker 1of spending um the the number one sign that a market's about to get foobarred uh like is when people come online and start talking valuations look at these peg ratios look at the this and this well you know you you hear everyone starting to justify why uh why this is an amazing value opportunity when when when you they're pulling that shit out of their uh out of their little uh reasons to to own it you know the market is in big trouble but like this is a a very very ugly uh a shellacking in this what's crazy is that when i when we look uh across the entire kind of ai space core weave down another 12 today the uh data center and uh digital infrastructure not as bad down about four percent and just starting to make lower lows but look at the the neoclouds the the irony about the uh the the neocloud etf is that they literally uh put this etf out at the peak that never happens that never happens down 60 percent in 84 days uh off of that right it you know it's very reminiscent of when they created the adr for sk uh hynix hynix yeah uh and literally it marked the exact top of of the stock when when they threw it out story as old as time oh yeah but another one like this is the ai super cycle down 12 percent today the memory stocks just getting slaughtered down 14% today. The power infrastructure ETF down eight, almost 9%. And even the nuclear stocks down 5%. You know, what's amazing to me is like, I love tracking commodities. And I love looking at all the different commodity stuff. And I'm fascinated by how much this nuclear commodity trade got basketed with the AIs. Like, it is not being traded like a commodity cycles kind of trade. Like, it literally- For
Speaker 2sure, it's part of the AI basket.
Speaker 1It's part of the AI basket. And just absolutely- It goes down as well. You know, I was actually even thinking about like the idea of fading this by pairing the long nuclear against a short like DRAM. Like, just playing the idea that the nuclears are going to be fine in the end, because that build out is still going to happen. But they're just right now that paired selling, or the correlated selling is happening. But I think that the recovery is much more sustainable in the nuclear space than it is the other ones. And so that's just an idea that I was floating around. Nonetheless, it's a bloodbath out there. Like, we're down almost 300 points. This is the biggest one. It's a one-day drawdown on an intraday basis that we had all year. Like, actually, I would argue, you know, like, when was the last time we had a 300-point down day? Shit. Like, you have to go back to Liberation Day.
Speaker 2Yeah. Maybe you do. Yeah. It's- I think you
Speaker 1have to go to Liberation Day for a 300-point down day.
Speaker 2Well, the NASCRAC is, you know, 1,600 points right now.
Speaker 1Yeah. No, no. Like, a 5- 1,600 point. Yeah, that's- Yeah. That's a- That's the definition of a shellacking for sure, buddy. And so, nonetheless, markets are down. Now, VIX is at the 25 handle, but I'm surprised we didn't see yet- Well, I'm not totally surprised, actually, because the S&P is not where the shit show is. Yeah. Let's be honest.
Speaker 2Let's remember here that the VIX is based upon the S&P 500. And although today we're down 300 points, it sounds scary, but in reality, it's 3.5% or something like that. And, Patrick, one of the things is that yesterday, even we were up, and, you know, we've talked about this before, but yesterday, the S&P 500 was what? 2%, 3% from the all-time highs? Yeah. The market was remarkably well-behaved till today. This is the first day of any fear. So, from a VIX perspective, it makes sense that we're not really panicking.
Speaker 1But the VIX at 25, but look at this. This is the VIX of the semiconductor, the SMH, up to 64. Back to where it was back in June, July. What is that? How do I get that? What's the- VX, SMH. So, the SMH ETF, but you just add VX in front of it. Really? I didn't even know. Yeah. So, like, you can see a huge spike here. And then you could look at the VIXN, which is VXN, and that's the volatility index for the NASDAQ 100. And you can see, actually, a much more meaningful jump, one that we've now- Yeah. surpassed the March and the June vol peaks. And so, when you actually go into the tech space, the vol's there. Like, there's definitely some capitulation going on in that basket. Yeah. the vxn you're saying for the nasdaq right and so your
Speaker 2argument is that yes although there's no there's no real panic in spooze vix there's all sorts of panic when it comes to the issue where
Speaker 1the epicenter of the selling and the epicenter is the ai story blew up like uh it's uh there's no there's no one at this point that can deny and you know it's amazing i'm not going to call out the people but there's no shortage of those um those people on uh on x that were like this is amazing buy on dip opportunity and and they're uh they're leaning on all of this valuations and all this stuff and um and you just the moment i hear that i've i've i remember during numerous market massacres like i i'm i've been trading almost as long as you i don't have as much gray hair or you have hair still so it's good yeah so like i must have been trading almost as long as you i don't have as much gray hair or you have hair still so i must have done something right let's be honest no no this is my real color buddy yeah it's shocking i know but uh but uh the um i've seen enough of these and i know how the sentiment shifts because the first thing that happens is momentum and everyone's like look you just got to own it because that's where the money's being made but once the momentum fades they have to come up with a shitload of stories as to why holding something that isn't working anymore is justifiable and that's when you start hearing all sorts of stories and when i see it's a market that is no longer working and everyone doing everything they can to pump it you know it's fucking done i don't disagree so uh okay so uh is there something you wanted to mention on this market no let's just keep going let's go through so listen uh that pop and drop happened on the midterms that obviously caught was an event trigger and like you were alluding to when we had conversations is that um it was while it was a trigger it was the fact that the market was unstable in the first place that allowed the trigger to actually have any meaning right and
Speaker 2let me just tell like one anecdote for this right a month or two ago as the option adjusted credit spreads for the bonds of the hyperscaler started blowing out that was viewed as actually bullish for the ai trade because what that meant was that the supply of data centers of compute was going to be curtailed because it was getting more expensive so it wouldn't as much wouldn't be built right and so they viewed that as a positive because they said oh look that means that these companies that do have it will be able to charge more because there's this infinite demand right so a month or two supply constraint on data centers was viewed as positive for the the ai trade today all of a sudden you know we have this blue wave everyone says hey i don't want data centers in my backyard this constraint on data center built out is now the end of the world and it's causing them to sell their stocks right and i go back to this idea that the price doesn't or so the narrative doesn't make the price the price makes the narrative and if the and if we had a situation where stocks were going up as a result of this then everyone would be sitting around going yeah it's going up because we're not going to build as many but it's just and to me the the reality is that these stocks were priced for perfection there was so much good news but baked in here everyone was too long there was going to be a surprise to the downside the only question is what was going to be the catalyst oftentimes it's only obvious in hindsight right like that's the thing like even in the dot-com bubble patrick you know we're you know 26 years since the popping of that bubble and we still don't know what really truly caused the end of it everyone has different theories if you go talk to old guys like me everyone has their specific anecdote that was the the point where everyone realized but the reality was the stocks were just priced for perfection and all of a sudden we ran out of buyers and that's that's all that's
Speaker 1happening here right so let's talk though the midterms being a trigger and while obviously the markets have become the the epicenter focus of what's happening because everyone's seeing the carnage happening the one thing i wanted to highlight here is that a crude oil experience from friday's highs to uh this morning's low a 17 and a half percent 18 dollar uh drop in oil right because now we had a democratic sweep and suddenly they're pricing the possibility that the u.s midterms um results will force trump to somehow get a hold of the market and to somehow move towards a resolution with iran giving uh this opportunity where geopolitical risk premium can be completely pulled out of crude oil which i think uh remains uh an absurdity because because really in the end iran's demands over the straight or her moves may fundamentally be incompatible um with what the u.s can find politically acceptable and so this idea just because the the american voter clearly objected to the fact that this war was going on and clearly uh uh you know even the democrats are now leaning into that saying that they want to end the war but the the thing here is is that it just may not be in any way feasible for the war to unwind uh you know from a game theory perspective i continue to view that iran's position has actually improved not worsened by these election results and other things so why would they come to the table and give an immediate deal when you know global inventories have been depleted and uh you know even though the u.s is rejecting their demands uh they now can wait it out they uh they know that um that they haven't been in a situation the idea that trump would come in there and say oh the voters have spoken i clearly over by uh overstepped in this war and we gotta accept the terms uh of uh of us unwinding this war and we'll have a peace deal in three days i call complete bullshit on that like there there is there is literally uh that's an outlier and while maybe a re-escalation is a gamble like the idea that some missiles will fly as a guarantee or something there are definitely a number of very live scenarios that a re-escalation is uh is sort of almost like the path of least resistance of of the the the way things are are moving and you know can oil just go and pull out all the risk premium like there's a a peace dividend in oil and everything's gonna be all right we can hold hands and sing kumbaya like uh what what's uh what's going on here i am saying here that this and my call was this kev this is what uh the equivalent for oil of what liberation day was for stocks with tariffs it was basically everybody was pricing in during the tariff period this idea uh that that these tariff threats were some sort of fundamental reality when they weren't and and they assumed all of the worst case scenarios of what those tariffs meant and uh and the outcome was completely opposite and that was a huge opportunity in the same way this idea that the uh the war is over and the risk premium can be pulled out of the market um a to me is completely nonsensical and uh and that risk premium could very easily return in the same speed and magnitude of which it declined this is my call i
Speaker 2i don't disagree with you patrick that uh you know i was i was telling you earlier that uh there's this fellow by the name of robert pape he's a professor at one of the ivy league schools and he's been very vocal about his uh game theory and how this this uh war would evolve and he's been spot on in a lot of ways and listen i don't agree with everything he says but i i like to to listen to him because he's been right fairly often and he talks about this next eight weeks being the most dangerous point of this war of this conflict right and and the reason being that you know we're at the point before the trump's uh change of power uh we're both side you know one side's increasingly desperate you know trump wants to appease the voters but at the same time the other side might be asking for too much to your point but uh you know i i joke about that that thing where there's that meme where it's like friends don't let friends drink and drive you know and the guy's taking the keys away from him at the bar i i feel like that friends don't let friends trade geopolitically and so i guess we're not friends
Speaker 1because you're like like let me just get thrown under the bus
Speaker 2here buddy um no but so to me though i don't think you need geopolitics to be bullish oil at this point because the reality is that the the surprise for the last year or the last six months has been how resilient the the oil market has been and part of the reason the oil market has been so resilient is because the the spr um emptying was way larger than everyone thought and so it kept prices in check while we were having you know what they should have been a catastrophic closure of the Hormuz Strait, it ended up being that it wasn't so bad because China and the U.S. mostly just flooded the markets with barrels of oil. Now, on the other side, that's ending. There's only so much supply. There's only so much inventory that they have to sell. And then eventually what we're going to see is on the other side, there's a huge demand coming, right? Because those SPRs need to be refilled. What this has shown is that the world is actually a very unstable place and you need to have your own SPR. So it's not just the U.S. and China that need to refill theirs. It's countries like India that previously had a smaller SPR that looked at China and said, hey, wait, we need to have a bigger one as well. So they increased their SPR. So to me, like the longer term story is that we're going to be surprised at the kind of just sea of demand that's going to be on the other side of this once the SPRs are finally empty.
Speaker 1Yes. Agreed. Agreed. And Yeah. And basically the interesting, just one last thing is like we saw a substantial pullback in the refiners. And I'm just going to use the crack ETF, one of my favorite symbols out there. But like the thing that-
Speaker 2You are a 16-year-old boy at heart, aren't you?
Speaker 1Yeah, absolutely. But listen, they made it. They made it. So they've been pulling back. And like the- They obviously was a huge bull market. We're getting almost a 50% retracement of the entire bull run. But refined products remain an incredibly tight market. And let's just imagine for one moment that oil actually doesn't recover fully and that it finds this $80 to $90, $90, $95 level. Then crack spreads are probably going to keep going wider. And the profitability of these companies is probably only going to go up. And so I think that's a big part of the problem. It's probably only going to improve if oil doesn't have some face-ripping rally. And so like I'm asking the question as to whether these refiners are a buy-on-dip here.
Speaker 2I don't know. One of my worries is that I'm kind of a global economic bear. And so I could see demand for the products, you know, surprising to the downside as the global economy rolls over. Okay. So that's to me. Yeah. Like that's how I view that.
Speaker 1All right. So let's briefly touch on gold. Gold bounced here, driven by this kind of drop in oil. I think that this idea that inflation expectations are coming off from the fact that oil dropped and gold traders are clearly ambitiously trying to look at this from an inflection point that could be where gold turns around. I'd like to just simplify. Simply say that I love the idea at a high level, but there's a lot of risks that this is early still.
Speaker 2Oh, I didn't expect that. I recently wrote about it. I, you know, I was already long, but I went really long into this. Like, I'm going to say this, but I feel like he's saying it. But your favorite, you know, technical pattern after the prairie dog is the inverse prairie dog. I'm going to call it the inverse prairie dog.
Speaker 1The turtle head formation.
Speaker 2Yeah. Yeah. So to me. Once it broke below that, there was every reason in the world for the selling to continue. And then all of a sudden, the next day it's bid and it's back into the range. I'm like, that's like a dream set up. I love it. I think it's behaving so well, Patrick. I'm going to, I know I'm always early. So like, I get it. I'm probably early, but I like it.
Speaker 1Don't forget that during a number of the prior sell-offs in the broad markets, when liquidity was, the people were getting margin called and seeking liquidity, there became the air pockets and gold still succumbed. And the way that I would almost say is like, I would feel like you should almost use a COVID bottom analog for what could probably happen, which is if they first risks a small washout. And then when it's clear that the Fed has to pivot, because they're, the economy is going into a recession and there's simply no way that we're going to be raising rates and their hawkish stance has to be neutralized. And a moment that pivot happens, then the only path of least resistance is going to be a rate cut cycle, printing money and all of these different things. And gold is going to be a wicked asset. But there's a fake out.
Speaker 2Can I push back on that? Yes. You're again, using something that is pre-2022. It was before Russia invaded Ukraine and the West zeroed their balances. To me, I'm not as sure as you are that it is going to be as much of a risk off. Sorry, I'm not as sure as you are that gold will suffer in a severe risk off thing, right? Because I suspect it will be almost the opposite of the financial assets. It'll be viewed as, as something that's real. And it's, I think to a little part of it, Patrick, you can also think about it as the U S dollar in the old days, when you had a risk off event, you bought U S dollars, right? That was the, that was the knee jerk reaction. I think on that, um, uh, like, uh, scenario, this environment, that's also changed. I don't think that you're going to get a risk off event and you're going to get the U S dollar bid. And I think today is a perfect example, right? Like we finally have a risk, uh, off event and you would think that the dollar should be bid today. Instead it's offered. And I think, I know I'm looking really closely. Like this is just squiggles and it's noise. I get it. But you know, Brent Johnson, that's what I'm going to call you right now, because you're, you're channeling your inner Brent Johnson. You're just so convinced that this is how it always has to be. And I'm saying that the world has changed. And I think you could have a situation where stocks go down, U S dollar goes down.
Speaker 1So here's, what I'm going to say. Okay. I would rather get in the second inning and miss the first leg and have you being right. And I'll get in later to be the rock star here, trying to catch this bottom while the market is getting its ass handed to it. I at minimum, I would say is that anyone who's taking Kevin's advice, I would look at the way
Speaker 2that's what I'm doing. That's all. So,
Speaker 1so, but, but I'm just saying if it's the advice or not advice, I would say is that this is maybe a unique opportunity to apply some convexity with some form of, I have no problem with that. I actually bought options as opposed to this. So if you're, I'm wrong. Yeah. If you're going to exactly. So if you're going to play this early, when you're early, it's always the greatest risk of, of being wrong and early. And that's actually when paying for the convexity often has the best payoff structure. Hey, and is there a upcoming
Speaker 2seminar about this? Why not? I think, and maybe I'll hold it on November 10th at 4:00 PM at 4:00 PM. I think I can't remember if you remember to say the time, but I knew that Danny would be upset if you didn't say the time, November 10th at 4:00 PM. So Patrick, I'm not going to disagree with you that I might be wrong. The other thing I just a quick little side note. One of the things that people need to remember is that how, what your, the rest of your portfolio looks like also should influence your willingness to be able to buy these things, right? So a perfect example is when was it? I guess it was earlier the last sell off and like a, you know, three, six months ago, there was a point when bonds and stocks were selling off together, right? The bonds were going down, dragging stocks with it. Right. And I had a buddy that was, I was trying the long side of the bond market every now and then I was just giving it a whirl. Right. And I had a buddy that was doing it as well. Right. And the thing about it, was that I was short stocks. Like I was net short stocks. Right. And that's the other thing is that people don't realize that like, when I'm saying I'm bearish, I'm just not like at not as long, I'm outright bearish. Like I like I'll trade more like Tudor and Soros did back in the eighties. But anyways, my point was that as I was trying the bonds traits, I was actually making money on my shorts as the bond market went offered. And I was losing there. I was still making money on my shorts. So the situation was, and my buddy was long stocks and then trying the bonds. And I said, you're just adding to your risk. You're not actually reducing your risk. And so again, in this case, I am short stocks right now. And I've been for a while. So for me to buy gold is not as scary as somebody who's long gold and sorry, long equities and suffering from the liquidity as is the kind of as things tighten up. And as problems occur, it's a good,
Speaker 1it's a, it's a good portfolio. You asset to have in your kind of a portfolio mix.
Speaker 2Well, and you need to, and you just need to remember that when you're listening to everyone, you need to realize, and that's why nobody can give you advice about what you should do and what your sizes should be. It has to go into your entire book. So yes, you can say I, Kev is a little more bullish than he usually is, or Patrick is waiting and you put that in there, but ultimately it's always response. You're responsible and you have to think about how it interacts with your entire book.
Speaker 1Love it. So, so Kev let's continue the conversation. Copper, And on the commitment to trader reports, going back to September, October, we were at the 100th percentile of bullish positioning on the one year, three year and five year look back. Like everyone was all in on the copper trade. What was actually fascinating to even though this is technically fully rolled over, this looks like it's going to get swooshed on the downside. But what was interesting was that there was a material reset of the long positioning without a breakdown. Like we got we got down where basically into a much more neutral state on the commitment of trader reports, where typically that kind of extreme positioning could have become the fuel for that acceleration. And and it really, you know, like I hear this on a. One year look back, copper basically is at the 20th percentile already, like like the 100th percentile was already kind of washed out, but that was before the breakdown so that it doesn't have the same flows risk that it had a month ago on that. But with that said, this looks like a typical topping formation. Lots of little. Prairie dog attempts along the high end to to to kind of get the next bull leg started. And if we're seeing the A.I. story selling, then the data center needing copper has been a part of that basket. Right. And and we may very well see that some of the speculative positioning is going to get shaken out here.
Speaker 2You and I just realized you're talking about copper. You don't say it anymore. Dr. Copper. Yeah, the Ph.D. in economics like I don't have. It does have a Ph.D. in economics.
Speaker 1I saw the document. It's definitely got the Ph.D. But the let's move on. But anyway, it's rolling over here and I'm concerned. OK, sorry. It's rolled over and I'm concerned. That's all I just was saying. What I want to move on to is the bloodbath of the widow maker. But is that Nat gas? Nat gas. This is this is the January winter contract. And, you know, I had this talking chart session with Chase back. Oh, my God. It's more than a month ago, whenever it was earlier in September, October, whenever. When were you when was he covering for you? October? I think it was September. September. I was traveling in September. Yeah. So so it was back in September and, you know, it was near four dollars. And he goes, I think it's going to go down to three. I was like, good. I was like, no frickin way, dude. And like, you know what? Great call, Chase. That was like it's he nailed this. This call like there's an abundance of Nat gas. But again, it's it's actually quite insane how this is remains an incredibly consensus view. Right. Like we remain zero percentile on a one year, three year, five year, like the amount of shorts on a 10 year look back. It's like we're literally at the one of the most extreme short positionings, a gross shorts. I mean, you have to go back to when crude oil was minus forty dollars back in 2020 to see a level of short positioning in that gas at this extreme. Yeah. And it has all of the widow maker shit written all over it. But anyone who's trying to buy this shit is having their asses handed to them like it like all.
Speaker 2Well, we got to tell you, we got to find out. Chase, you had to tell us what you think, buddy.
Speaker 1Yeah. He's obviously the guru. He's the the neck gas whisperer. Yeah, exactly. But at some point there's going to be some stupid little thing like a polar vortex announcement. Some some kind of like it. Now, whatever announcement is going to be like, OK,
Speaker 2let the press release out.
Speaker 1Press release of the polar polar vortex. Anyway, but the point, though, is there's got to there's so much room for there to be a trap here that's going to squeeze these. But right now, the price continues to reward. Short positioning. So they've been massively short and just the payday has been coming in over and over again for them so far. But we've seen this. This is why it's called the widow maker that like this is one that it could be down at three and a quarter and then three days later be a five bucks.
Speaker 2Oh, yeah. And Patrick, we that's just recent history. Go back to like 2010 or whatever it was like when was like the Brian Hunter type like when? Yeah. It went to it went to 20 bucks or something. Right. Yeah. Like it was. Yeah. Thirteen to fifteen bucks. Yeah. Oh, four.
Speaker 1Yeah. Like ten bucks. And back in 2022, seven, eight bucks back here.
Speaker 2I can tell you with that contract, when is it ten bucks? It becomes really big. Oh, yeah. Like when you're with that multiplier. Yeah, yeah, yeah. I remember one time when it was a ten bucks just trading on one lot for six of the giggles and then going, holy shit, look how much money I just lost. It's just like I was like, holy shit, this thing's monstrous, right?
Speaker 1Like. Absolutely. Absolutely. Listen, we're we're going to I want to keep this one a little bit shorter today. So but we do need to touch on interest rates and so far. What I was shocked yesterday was with an oil move, the degree that we saw. Yeah. Usually that implies some sort of a. Disinflationary impulse. And I would have thought there would have been a bigger response in anywhere in the bond market. 30 year, 10 year, two year. So for whatever, I thought there would be just something like a candle that looks like there was a political event. And I was shocked that at least as of yesterday, everything was within their five day ranges. There was almost little, no reaction in the bond markets and rates markets. To this today with the bloodbath, we're clearly seeing this is the December 2027. So for a little bit of an uptick here on on the upside that of of this, you know, showing that maybe we're moving towards a Fed that isn't going to be able to hike because really this over contract has to get to like 96 in order for. I did to just be neutralizing all of the rate hikes that are being baked in.
Speaker 2Yeah, I was looking at it today, Patrick, I kind of was surprised that they still have a 70% chance of us down to 65 now. But when I looked earlier was 70% chance of a December hike. Like they they're barely taking out the December hike. Forget about like the potential. If this really got unglued, how they have to be cutting. To me, like, and I
Speaker 1mean, you've talked about the idea that we could go down to like what two or 1%. And I think eventually if we have if
Speaker 2if we have a financial accident, we're going to 1%. And I don't think we're ever going to zero again. I think they learned their lesson there. We're never going to zero, but we're going to just
Speaker 1just to give a reference point. That's a rally like that's that's the 1%. Here's your 2%.
Speaker 22% levels. Again, that's a financial accident, right? That's not just things rolling over. And to me, that's but
Speaker 1a financial accident tends to emerge during periods where a lot of people are losing money. And and so while there's no guarantee of a financial accident, when we when we're seeing the kind of AI carnage, that's how out there right now. All of that money that was flooded. That was flooding into financing all of this AI stuff. Somebody is offside. And and if that was leveraged, like we need it, we need
Speaker 2the broad market to get to get tagged 20 plus percent for there to be a true financial accident. So yeah, Nasdaq's gotten tagged 15%. But the most people are S&P 500. We need the spooze or, you know, the Russell 3000 or something to be off 20 plus percent. Yeah. And even more. And then we're going to 1%. And that's what I think. And we're going to be shocked at how quickly it occurs. Now, here's the real question for you, though, Patrick, is like, how do you play it? Do you just lever up the front end, assuming the Fed's going to do that? Or do you actually go out and buy some duration out the curve? Ultimately, this is how I think it's going to play out. If we are to get a financial, let's just assume that the selling continues in stocks way more than. Catches everyone off guard and we keep in a continuous. I suspect that the curve would invert. Right. and the Fed would actually be slow to cut rates, right? If you remember back, you know, when was it? Was it COVID that they were slow? I think that they were slow to cut rates in COVID, right? It was one of these situations where the economy, the curve was saying this, and they weren't following the curve and cutting as aggressively as they wanted them to cut. And I suspect that will be the initial reaction. So I could see a situation where in the initial, like let's say month or two of a financial accident, the Fed is behind the curve and the curve inverts, at which point you'd be better off with tens or thirties and playing that. But that ultimately when the Fed responds, the curve will respond the other way and the Fed will overdo it. So that's my call. I think you could have, I almost wonder if you should buy fives or tens for a financial accident and then very quickly switch them into the front end.
Speaker 1Fair. Fair. You know what? It's funny, but the economist may have very well called the.
Speaker 2Patrick, I'm an idiot. I should have just, I was sitting around waiting for one more dip. And like, that's why I'm most confident that the bond market might actually be okay is because I didn't buy it and I was getting bullish and I was trying to do it. And I got cute and then that came out and I should have just closed my eyes and bought it because it was on the cover, as you mentioned, and I screwed up. And I, even now, as I'm sitting here, I feel like I should own it and I don't. Which means it's going to keep going.
Speaker 1Yeah. Now, all the listeners now heard it. Like, listen, Kevin doesn't own it. And you know what? And he wants to. I don't have enough of it either. I have some call options on the TLT, but, you know, I clearly do not have enough rates exposure at all.
Speaker 2So, yeah. And I, listen, I'm so scared to do it. And I know when I do it, it'll roll over. So, when I do it, everyone can sell it to me. So, you should buy it now. Wait for me to capitulate and sell it to me, you know, $5 higher. That'll be the top.
Speaker 1I love it. All right. Well, you know what? I think, actually, you know what? Let's quickly look at credit. You can see, you know, corporate bonds rallying very much like treasury junk bonds, a much more muddled picture as credit spreads are widening in the thing. You can see a distinct breakdown in the senior loans ETF on the downside. You have, and this is the interesting one, the private equity, the BDC basket, not really yet succumbing to any of this kind of pressure. In fact, you know, like you look here. I will actually, you know, I'll might be a clean short here. That's a, that's like a rolling over after a bounce. But like, you can see like Blackstone off, off of a Fibonacci retrace here is, is rolling over. These are actually interesting potential ones, but you can see overall the credit markets have not broken yet.
Speaker 2Ah, parts of it don't have Patrick. So, you're right. Like there's parts of it. But if you go look at like triple Bs. Versus triple Cs, that part is blown out there. And not only that, if you're sitting there and you're trying to fund, you know, your core, we've asked them how, how good credit markets are right now. Yeah. So I'll take a little bit of the other side.
Speaker 1No, but I'm just talking about on this broad ETF basis, because usually when you're in the middle of a shit storm, it, the contagion spills over there and you, you'll see the pressure emerge on these ETFs and that has not specifically come. Okay. Nonetheless. I think we can wrap things there, Kev, but I'll tell, just leave listeners like, look, you know, S and P is down more than 300 points. Just be safe out there. Everyone like, you know, don't, you know, use protection. There's no, you know, it's, it's, you know, you don't, it's gotta be safe out there. Thanks dad. And,
Speaker 2and by the way, if you want to learn how to use protection, Patrick, everyone already
Speaker 1heard it. They're coming if they want. It's good. No, but listen, thanks for that. But listen, Kev, where can, I've already had the chance to plug, but where can everyone find your stuff?
Speaker 2MacroTourist.com. Listen, bear market.
Speaker 1By the way, I'm just going to do a little plug here because Kev, your, your shit that you've been writing recently has been some top notch stuff and, and I think that listeners who haven't given Kevin's newsletter a shot, you know, reach out to him and get a free copy of a recent letter, but like I read it almost once a month. You're doing so good. It was such a nice plug.
Speaker 2No, in fairness, I do,
Speaker 1I do, uh, I do, uh, peek in there to see what, uh, w w what your core themes are and it's been pretty awesome. So keep it up buddy. It's a good job. Anyway, listen, everyone, uh, this is just a talking charts only session. So thanks everyone for joining us. Uh, any closing things? No, that's it. I'll let you go. Thanks everyone. Have a great week.
Speaker 2Patrick says, use protection. Cheers, everyone.
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