Closing Volume

- NYSE volume 8% below its one-month average;

- NASDAQ volume 4% below its one-month average

- VIX: down 8.74% to 18.70

Breadth

S&P 500 ETF Sectors 

Nasdaq 100 Heat Map

A special thanks to all the subscribers and our management who continue to provide me with this platform to express my views.

I will soon be going on my 28th year (!). I am fairly certain that few have had an extended streak like this in the business.

Of course, thanks for reading my Diary today and all week.

Enjoy the weekend.

Be safe.

douglas cassel

I get Doug K's TLT trade, and agree with the underlying economic thesis. However, I think following him has a real potential short term risk. The Iran/Israel confrontation has several possible outcomes. The alternative i feel most likely(for what that is worth ) is an Israeli attack on Iran's oil and refining facilities. At that point, I suspect Iran is likely to do the damage they can, not in Israel, but in Saudi and Kuwait. They can attack the oil fields in those countries and close the straight of Hormuz. Inaccurate missile fire will be much more effective than they have been with attacking Israel.

I suspect this escalation might lead to a flight to the safety of US bonds.

The timing is uncertain, but I think things could happen as soon as this weekend, and making trading adjustments pretty difficult.

Dougie Kass

always possible, i will short more in that event.

Equities started the day buoyed by the better-than-expected jobs report, surging by nearly +55 handles in premarket trading. In a relatively brief period of time, equities approached breakeven and have rallied to be +35 handles (in S&P terms) with a lot of volatility back and forth all day (Ideal for trading sardines but not for eating sardines). 

I had a good trading day.

Between three lengthy research calls I traded actively in today's premarket regular trading sessions — mostly via Index common and calls (shorting, that is):

Today's "things":

* I reinitiated my  (SPY)  and  (QQQ)  common shorts at $572.04 and $486.79, respectively (and continued on a scale higher) after the jobs release. I covered most of my short Index common right after the opening on a 50-handle reversal lower from the highs.

* At around 10 a.m. I shorted the rally which took us more than halfway back to the early highs (via short calls). I covered some of those calls on a reversal (lower) 30 minutes later.

* Later in the afternoon I sold Index calls short on the next ramp +35 handles in S&P (short calls). I plan to keep these and I have a scale higher to sell more.

* Phew! All of today's Index shorts were profitable.

* I sold the balance of my out-of-the-money short-dated  (OXY)  calls. I currently have no position in OXY.

* I very modestly reduced my homebuilder shorts on moves between -$5 and -$8 lower. Will reup on a rally.

* I day traded  (MCD)  profitably (shorted above $305, covered below $303) and remain small short.

* I added to my  (TLT)  short.

Day's low in bond prices, day's high in yields.

Short thesis on our latest short,  (TLT) , coming early next week.

As promised (in a rally), with S&P cash +35 handles I am replacing the short Index calls I covered much lower. 

Wolf Street howls about the labor market's false alarm.

Scott Galloway's No Malice/No Mercy.... Fallen Angels.

I covered 3/4 of my Index common and call shorts on the -50 handle drop from the morning highs.

I plan to re-short on a rally.

At 11:00 a.m.:

Breadth

Sectors 

Heat Map

* How can you not be romantic about baseball and investing?

* More lessons from the baseball diamond.

"Baseball, it is said, is only a game. True. And the Grand Canyon is only a hole in Arizona." 

- George Will

Humphrey Bogart once said that, "a hot dog at the game beats roast beef at the Ritz."

And Yogi Berra once exclaimed that "love is the most important thing in the world, but baseball is pretty good, too."

I second those emotions.

Last night's New York Mets/Milwaukee Brewers game when The Amazins' Pete Alonso stunned the crowd with a three-run home run in the top of the ninth inning to advance to the next Playoff round (Mets vs Brewers highlights: Pete Alonso home run sends NY to NLDS (usatoday.com)).

That moment was a reminder of the beauty and excitement of baseball and the lack of predictability in sports. As Grandpa Koufax used to say, "Dougie, there are only two seasons: Winter and Baseball":

Baseball and stock market memories have been numerous over the years.

While baseball games are un-timed and the stock market trading session is timed, the unexpected outcomes and excitement are why some of us are so immersed in both activities.

As I will discuss below, there are similarities between baseball and investing. Enjoying success in both requires the ability to adapt. Only by being open to change can one have a true opportunity to get the most from one's talent in playing baseball and investing successfully.

As Yogi reminded us, both baseball and investing are 90% mental and (especially with the dominance of machines and algos) the other half is physical.

We wake up every morning and watch equity markets (at least) between 9:30 a.m. and 4 p.m. and some of us watch ball games in the afternoons (less so these days!) and during the evenings -- with wonderful (and some less than wonderful, depending on your perspective) surprises:

Baseball Memories

Over history, the wonders of baseball have been numerous:

Shohei Ohtoni's greatest game at the plate in history GREATEST GAME EVER?!? Shohei Ohtani goes 6-FOR-6 with 3 HOMERS, 2 SB and 10 RBI! (Joins 50/50 club!) (youtube.com),

Willie Mays' "catch" Willie Mays makes "THE CATCH"! His famous over-the-shoulder grab is one of the best EVER! (youtube.com), 

Ralph Branca's pitch and Bobby Thompson "shot heard 'round the world" Bobby Thomson's Shot Heard 'Round The World (youtube.com), 

Cousin Sandy Koufax's ballet-like performance and perfect game (1965) CHC@LAD: Koufax's perfect, game called by Scully (youtube.com), 

Babe Ruth calls his "shot" BABE RUTH'S (1932 WS) CALLED HOME RUN SHOT' RARE VIDEO & COMMENTARY (youtube.com), 

Don Larsen's legendary perfect game in the 1956 World Series WS1956 Gm5: Scully calls Larsen's perfect game - YouTube , 

Bill Wambsganss' unassisted World Series triple play Bill "Wamby" Wambsganss, Only Unassisted Triple Play in MLB World Series History (1920) & Biography (youtube.com) , 

Carlton Fisk waves the ball fair Must C Classic: Fisk waives walk-off home run fair to win Game 6 of 1975 World Series - YouTube, 

Bill Buckner's botched play on Mookie Wilson WS1986 Gm6: Scully calls Mookie Wilson's epic at-bat - YouTube , 

Hank Aaron's 715th home run Vin Scully calls Hank Aaron's historic 715th home run (youtube.com), 

Pete Rose's 4,192th hit CINCINNATI REDS: Pete Rose, 4192 Record Breaking Hit of 1985 (youtube.com), and ...

Bill Mazeroski's winning home run in the 1960 World Series 1960 WS Game 7: Mazeroski wins World Series with homer - YouTube 

Stock Market Memories

Like baseball, there have been amazing and memorable investing events, though Vin Scully never announced them ... like buying Nvidia  (NVDA)  at $2.32/share in 2016 (NVIDIA - 25 Year Stock Price History | NVDA | MacroTrends),

... and ...

... purchasing Tesla  (TSLA)  at $1.99/share in mid-2012, owning Amazon  (AMZN)  at $24/share in 2013, shorting Resorts International at $190/share in 1978 (and watching it go to zero) and many other shorts like Baldwin United, Enron, Tyco, Sino-Forest and, of course, Lehman Brothers and Bear Stearns. And who could forget Soros' "breaking the bank of England?"

***

I have written many columns that compare baseball to the stock market. Here is one of my favorites:

Lessons From the Baseball Diamond

"Its a beautiful day.

Lets play two!"

-- Ernie Banks (Chicago Cubs)

Tonite Dodgers Stadium will host the seventh game of the World Series for the first time ever.

Being related to Hall of Famer, Sandy Koufax, I bleed Dodger Blue.

I cant wait for tonite's game.

Over the last two decades I have written more than fifty columns noting the parallels between baseball and investing.

* Recommended Listening

* Playng Ball With Warren Buffett

* Rounding Third and Heading Home

* Forget Stocks Its Opening Day

* How Long Will The Joy In Mudville Last?

* Apple is Like Ty Cobb

* Who (Hu) Is On First!

* Never Fear Getting Back in the Game

* Practice Your Defense

* Take Me Out to the Ball Game For a Sense of History

Here is one of my favorites from more than two years ago:

Loss of (Our Market) Innocence

SEP 9, 2015 2:34 PM EDT

"We live in a dystopian investment world whose markets -- currencies, commodities, stocks and bonds -- have morphed into an Orwellian backdrop of omnipresent government intervention and manipulation that is increasingly dictated by the quant community. (Who worship at the altar of prices and price momentum and are agnostic on values.)... In recalling this past week's action, it should be clear to most that the market mechanism is broken.

-- Doug's Daily Diary, Is 2015 Really 1984? (Aug. 28)

As I wrote in this morning's opening missive, "A Picture of Imperfection," the market's mechanism is broken.

The collateral damage ... that has come out of a broken market dominated by quants makes both trading and fundamental investing difficult in a market that has morphed into one without memory from day to day. Moreover, "artificial" and deep gaps or advances in prices -- another outgrowth of quants' dominance in daily trading activity -- also render technical analysis less useful.

Investment Lessons From Baseball

Over the past 16 years, I have made clear my passion for the game (and purity) of baseball and the investment lessons I have gleaned from the sport.

Two years ago, in "Defense Drill," I pointed out that it's not your batting average that matters in investing and trading, it's your defense that counts. Back in 2012, in "America's Pastime Applies to Markets," I recalled that I have learned over my career that (baseball) history is instructive for investors. And back in the summer of 2007 -- just before all hell was about to break loose -- I penned a column titled "Take Me Out to the Ball Game for a Sense of History":

But, tonight, September the 9th of Nineteen Hundred and Sixty Five, Sandy made the toughest walk of his life I am sure because through eight innings he has pitched a perfect game. He has struck out 11 and he has retired 24 consecutive hitters.

You can almost taste the pressure now... Krug must feel it too.

There are 29,000 people in the ballpark and a million butterflies.

I would think that the mound at Dodger Stadium is now the loneliest place in the world.

A lot of people in the ballpark now are starting to see the pitches with their hearts.

He is one out away from the promised land.

You can't blame a man for pushing so hard.

On the scoreboard in right field it is now 9:46 p.m. in the City of the Angels, Los Angeles, California.

A crowd of 29,139 just sitting in to see the only pitcher in baseball history to hurl four no-hit, no-run games. He has done it four straight years. And now he has capped it with a perfect game.

Sandy Koufax, his name will always remind you of strikeouts. He did it with a flourish. He struck out the last six hitters. And when we write his name in the record books, the "K" will stand out more than "O-U-F-A-X."

-- Vin Scully, calling the last inning of Sandy Koufax's perfect game 50 years ago

In marked contrast to the markets' imperfection, perfection was found on a baseball diamond in Los Angeles as 50 years ago today my cousin Sandy Koufax pitched a perfect game against the Chicago Cubs. The Cubs pitcher, Bob Hendley, threw a one-hitter -- making the game, arguably, the greatest pitching duel in history.

As a teenager, I listened to the game with a small transistor radio. I moved the radio around my bedroom in Long Island to get the best reception possible.

But, through the beauty of YouTube, you can listen with clarity to the last inning's broadcast by legendary Dodger announcer Vin Scully.

And here is the box score of the game.

Not My Father's Market

They don't make pitchers like Sandy anymore and they don't make markets the same way they did either ("in the good old days").

Call me old-fashioned, but in Season of the Glitch, I outlined why more volatility will emerge from our broken markets and in the past I have been adamant in my view that we should KILL THE QUANTS BEFORE THEY KILL OUR MARKETS.

There have been a number of factors that have conspired over the last decade to produce the current environment, which resembles less of a stock market than a casino -- providing fertile ground for the disruptive influences of quants, risk parity and other strategies that pay little heed to balance sheets and income statements:

-- Regulation: Volcker Rule, Basel III, Dodd Frank prevented dealers from providing their classical role of ensuring market liquidity and stability -- in part because of lowered allowable leverage and, in part, because of a mandated reduction in proprietary trading activities.

-- The elimination of the uptick rule in 2008: This will go down as one of the dumbest regulatory moves ever.

-- The proliferation and popularity of ETFs: These weapons of financial destruction(which rebalance during the day) have taken a much larger share of trading activity as retail investors have moved away from individual stock picking and toward the use of "these baskets." (As evidence, a disproportionate amount of stock trading activity occurs in the first 30 minutes and last 30 minutes of daily trading, when ETFs "rebalance.")

-- The decline in retail investor involvement

-- The electronization of the NYSE: This has eliminated the stabilizing impact of market makers and specialists. In the past, human beings have used common sense, today emotionless machines rule the day and have recently proven disruptive to our market system.

-- The steady drop in commission rates, which gave brokerages less incentive to take the other side of a trade.

There are some easy near-term solutions to the adverse impact of our Brave New Market -- including the adoption of a tax on financial (stock) transactions and/or the reimposition of the uptick rule.

Unfortunately, the SEC is asleep at the switch and, for now, we have to play the hand we have been dealt.

Bottom Line

So, get used to spending more time in a trading mode and less time in an investing mode -- and given the rise in volatility, keep an eye on your portfolio's value at risk (VAR).

My cousin Sandy Koufax controlled his destiny with his golden left arm.

However, to an important degree, we -- as market participants -- have lost control of our markets and our investment destinies.

It's a sad state of affairs that is not likely to be resolved any time soon.

Let's Go Yankees!

subscriber comment of the day

Rojizo

32 minutes ago

I asked ChatGPT what kind of analysis we need today. Here’s what it said:

“

Ludicrous forecast - lead the way.

O speak anomalies today.

Tell us - shall the SPYs and Qs,

Ascend the open or tumble through?

Shall they soar or shall they fall?

Wild prediction – now tell all!

Ludicrous! Yes, make the call.

To close above? Beneath the open?

Reveal a most outlandish token!

For the plea of subs has spoken.

Peer into the sordid mists

(for all readers now insist!)

what is till now, will it persist?

or end with unexpected twist?

Omitting you should be remiss

Great oracle of foolishness!

So come now to our Dougie Kass,

To give a ludicrous forecast!

9 minutes ago

STAFF

With S and P cash +40 handles I am reentering short Index calls.

STAFF

13 minutes ago

Homebuilders downside leaders.

STAFF

1 hour ago

In premarket trading I am shorting the gap higher.

I reinitiated my SPY and QQQ common shorts at $572.04 and $486.79 respectively.

I am working on a scale higher.

Charts from 8:19 a.m.:

Chart from 8:34 a.m.:

In premarket trading, I am shorting the gap higher.

I re-initiated my  (SPY)  and  (QQQ)  common shorts at $572.04 and $486.79 respectively.

I am working on a scale higher.

Upside:

-B +11% buyout spec

-SND +12% special div

-MMLP +9% acquired

-SMMT +6% Harmoni trial update

-CLMT +3% funding agreement

-BGNE +5% Onco360 partnership

-APOG +5% earnings

Downside:

-RIVN -7% Q3 production update

-SAVE -31% bankruptcy report

-LFCR -2% earnings

-ZIM -10% ILA dock workers agreement

“What frightens us today is exactly the same sort of thing that frightened us yesterday. It's just a different wolf.” 

- Alfred Hitchcock

Bonus — Here are some great links:

The Five Most Important Charts 

Tech Support - Trading Adventures

China Stocks Charge Into Bullish Territory

China, Market Misbehavior and Election Risks 

I remain short  (TLT)  (my latest short).

Wolf Street howls about the Fed's balance sheet.