Bubba Horowitz Says the Nasdaq Has Already Broken Down

We're bringing back in Todd Bubba Horowitz. He's one of the original market makers from the SIBO floors back in the day. He was with us about six weeks ago here on the show. And as I'm reminded by Frankie all day long, one of Frankie Walsh's old friends, Todd Bubba, welcome back to Tasty Live. >> Great to be with you, Chris. Always a pleasure to be here. And Frankie is the best. [clears throat] >> You know, I want to get a read on your tape uh your read on this tape here today because it's been an interesting week or two here as we made our way through the middle of October right now. We just had a pretty aggressive sell off in technology and then a meager attempt to recover the past two sessions. So when we're looking at the S&P and the NASDAQ futures here today, what's the price action telling you about where we are in the broader market cycle now? >> Well, I think I think the NASDAQ has actually broken down and I think we'll we'll find out for sure uh tomorrow when you start with Meta and Tesla earnings. Uh but I think you if you look at a chart, they've definitely broken down and broken down to some key levels. So we'll see if they have the ability to hold. I don't think they will hold. I think that uh they're very overvalued. If you look at the K Schill or Cape index, we have PE valuations that are higher than they were during the internet bubble. So, as far as the Russell, yeah, had a nice rally today, but the Russell's also broken down. The only index that's holding up well in here is the S&P, which is obviously the biggest index, but it is holding pretty smooth and really just in consolidation. But I'm looking for these markets to all kind of fall apart here a little bit. I I think there's going to be more selling pressure. I think there's a fair chance that we get a rate hike. I know we got a little rally in in rates this morning because of the bad housing numbers, but there's not a lot of good news out there to continue to drive these markets higher. So, I would expect them to potentially break to the downside. >> So, you're talking about breaking to the downside here. What's going to help you distinguish between a short-term bounce that's ultimately going to break lower versus a more sustainable reversal here? What levels do you have in mind? Well, I I think there's I I mean, listen, long term, I'm expecting a huge collapse, 40 to 60%. But short term, I think we've got five, six% on the downside, and you're going to get these as we saw from Sunday night into Monday. In fact, I told all my people on Saturday when I was doing my call, I said, "Look, if we open lower Sunday night, there's a good chance you're going to get a pretty big rally." And of course, we did. The markets turned almost immediately. You know, we get oversold. And typically, if you get two to three to four standard deviations away from the mean on either side of the market, you're going to get some correction or some pullback. In this case, we got a little bit of a correction, but the NASDAQ, which was down at one point this morning about 250, rallied all the way back to be plus about 150, is now down and looks like it's going to close lower on the day. I think that's pretty weak, and I think it's showing a lot of weakness, and I and I expect the sign to continue. Uh, I would certainly be a seller in the S&P at 7,800. I'd certainly be a seller in the NASDAQ at 30,000. >> You mentioned bonds the last time that we were talking on air and they were still on approach towards that five 5 and a half% level. We've settled back in near 51 here in recent days. Uh is this a rally to sell in notes and bond? You still see the 10ens heading towards 6%. >> I think the tens are going to 6%. I I think there's a there's a a 50/50 chance we get two rate hikes before the year's over. the bond market is tired of the Federal Reserve uh trying to play with these rates. And I think Kevin Worsh is the great is the right guy. I'm not a Fed fan. I don't like the Fed, but I do think Kevin Worsh is the best that I've seen since I've been around in this in this business. Uh but I think that we're on our way to 6%. I think there's a good chance to get there before the end of the year. I think the rally you saw in the futures, which obviously futures work inverse to the rates, was more purely a dead cat bounce. I mean, we got absolutely clobbered and we took the, you know, the the 10ens down to the 103. So, again, I think that this was nothing more than the dead cat bounce. And certainly, I'm a seller of the 10ens at 106 and the futures. I'm a seller of the 30s at 107. So, I think they're they could go that high, but they could also break further from here. I don't think they look very good. Uh, I think interest rates are going higher, and I think the bond market is telling us that they want higher interest rates. >> So, how are you structuring these trades? Are you buying out of the money puts? Are you selling call spreads? Are you just going straight to the futures? >> I'm going straight to I go straight to the futures markets with a lot of thing. I use I use the option market to sell a lot of credit. I use the when I want a a real position on that I I have some big benefit to. I'm going to go right to the futures market and I'm going to sell futures. And as of right now, I am short bond futures and I'm short the 10 years uh as well as the S&P. >> Well, for the folks listening here, tick value for those notes is going to be $1562.5 for the bonds to be $31.25. 25. Uh I myself have been picking up some long deltas and bonds, but those go back two or three weeks and a little bit more higher. I think I'm getting ready to flip myself. These things are ultimately still in downtrends. So we have this view on stocks. You pretty deconstructive long term. 40 to 60% lower is nothing to huff at. But if we take a look at 6% yields, maybe that leads to a bigger recalculation of the value of all this equity out there. What does this do for gold and silver? Gold and silver have just been total dogs here for the past I mean literally since the last time we talked they're down five six 10% in some cases. >> You know what I I think that of course the gold and silver uh flourish typically in in high inflation but they don't they don't flourish in high interest rate environments. I think they're pricing in more rate hikes. I think they're pricing in higher interest rates. But I think basically gold's held 40,000 which I mean excuse me 4,000 which to me is a pretty big level for it to hold and silver is holding up again it's listen let's face it silver is down 50% from its high. I think that they're both reasonable buys in these in these areas I'm starting to accumulate and starting to buy. But when I'm buying in the metals as a as a long-term buy I'm buying physical. As a trader I would still be willing to short into a big rally. I still still think there's a little bit of down move. I think you've still got, you know, let's say 130 bucks on on s on gold before we come to the bottom. I figure there's at least you probably about 10 bucks more on silver if we're not at a bottom. But I have no problem as an investor buying some silver physical and buying some gold here. I'm willing to average in because I think they're going to go higher. I think they are accounting for the bad news that you and I are talking about. I think they're accounting for the higher interest rates and I think once that all comes out, I think you'll see a nice little rally from them. >> Yeah. I like how you just mentioned as an investor totally different time horizon than being a trader here. Uh Todd, while we have you for a few more moments here, I'm thinking about volatility right now and the correlations in the broader market. I saw that the SIBO's core and M index is actually falling today even as VA has been stickier in recent sessions. Uh for me, when I see a low core 1M and a high V, it tells me that we're getting some pretty decent moves underneath the surface. Index V may be I don't want to say artificially low or suppressed, but it's certainly not telling the full story of the movement that you're seeing. there's limited co-movement among stocks and that movement may be greater. Uh would you consider this a stock pickers market now that we're getting into earnings season? Would you move away from the index and focus on some idiosyncratic bets? >> I think you can if you're listen remember if you're willing to take the risk because there's a little bit more risk especially if you're trading in the option markets because of you know the way volatility spikes. But you are 100% correct. However, if we go back and look at Friday, we had a about a 40% move in volatility. So it's natural that it's coming back down a little bit here. Uh but certainly if you have some you know we we we've seen over the past few years that many of these big companies almost intentionally underpromise and overd deliver into earnings. So many times we get these big rallies. So if you're again it's it's it's all about risk when you're either trading or investing. And in this case, if you're trying to pick stocks for a trade, you are opening yourself up to a little bit of risk because certainly the overnight trade, you know, when these come out after the after the close, there's some very, very large movement. So again, if you're willing to to take the risk or put in a solid options position that covers up your risk, I think it is a stock pickers market. >> All right. So, while we're getting you out the door, give me uh your favorite bullish chart right now and your favorite bears chart right now. And I say this uh from both the trader and the investor standpoint. What are you looking at short term? What are you looking at longer term moving forward? >> Well, I I think that u I I think that crowd is looking pretty bullish. The CRWD Charlie Romeo Whiskey Delta, I think that looks pretty bullish, although it pulled back quite a bit today, but I'm I think it looks really solid and strong. Uh and I think that uh Apple to me looks a little bit overbought. I'd like to be I'd like to be a seller in the in the Apple market here. I think we've started to turn over at the top there as you can see. Uh so that would be what I'm looking for. You want to look for something I mean some charts that are are really bearish is is you look at like a coin or you look at monster. I mean monster look although it's up today seven bucks it looks pretty awful. Uh as well as SMCI looks pretty awful as well. Uh INOQ and and the the point with a stock like INOQ and some of these is these are the ones that typically break first before the big ones break. And I think you're seeing a lot of pressure and a lot of these things break down from that were at much higher prices. You've seen 50 60 70% haircuts in a lot of these smaller technology stocks. >> Yeah, some of these smaller technology stocks have been absolutely killed and and alongside that in recent sessions uh you know flagged earlier today. You look at some of these junk bonds, the triple C rated junk bonds here, uh that continuing to fall even on days when Treasury yields are going down. You're not getting any relief in the credit space. So why would some of these junkier equity names find a bottom otherwise? Uh Bubba, give us a lesson here out the door. You've talked a bit a little bit more about becoming more selective as you become more experienced of a trader. I feel like younger traders are always trying to do something every single day. How do you know when you got to step away from the uh step away from the table? I think when you if you learn to read the tape, you learn to read the chart, you can certainly see opportunities that will arise, but there's not always opportunity. And I think that's what people have to recognize is that, hey, sometimes there's nothing to trade. I mean, you know, we used to go to the golf course. It was on the trading floor. If there was nothing to trade, we'd walk away because no trade is the same as making a trade. So, if you if you're willing to walk away, if the chart or the stock or whatever you're trading doesn't match up to exactly what you're looking for to make an entry either from the long side or the short side, doesn't matter, then you walk away. And certainly, I use options to build credit spreads to start to build a position. And typically, I won't make a trade on a short-term basis until a stock or a futures moved three standard deviations in either side. And I don't care which side of the market I'm on because when I'm trading, I'm trading purely the math of that of that particular stock or that particular index. Doesn't really matter. Again, to me, all charts are the same. I need to see certain qualifications. And what I look for is a move that is so far from the mean that it almost has to retrace. And that's usually about a 90% probability trade, which is why I start with credit. And if it breaks my way, then I can add that position and make it bigger at the same time. >> All right. So, uh, the chat wants to know one Frankie story before you go. This is a family show, and Frankie said that most of the stories that you guys have are not for on air. So, you're not, but give us a Frankie story here. >> Frankie and I went went face to face and got into a little bit on the floor. He screwed something up for me and I got a little bit at him. But overall, he did a phenomenal job and I I can't say much about him, but he can be a little feisty and we did we did get a little feisty together. Uh, a little bit nose to nose. Of course, with him and me, it's his nose to my chest, but we did get into it pretty good. >> Uh, we love Frank Walsh behind the uh behind the screen here. Hey, Todd. Bubba, we'll see you soon. He's been Todd Horowitz Bubba Trading. Go check him out.