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The Court Date and the Drawdown |
By Prof. Jeffrey Bierman, CMT
I had to argue a speeding ticket in court earlier this week. |
Didn't know if I'd win. Depended on the judge. Some days you get someone who listens to logic. Some days you get someone who already made up their mind. |
Just like the market. |
You do everything right. You follow the rules. You time your entries. You set your stops. And sometimes you still lose because forces beyond your control decide the outcome. |
That's what I've been thinking about all week. |
Teaching and Trading Don't Mix Well Right Now |
Friday mornings I teach corporate finance at Loyola. Capital budgeting. Degree of operating leverage. Breakeven analysis. |
Forty-nine students enrolled. Twenty-five show up. Twenty-four stare at me like I'm speaking Mandarin. One kid—works at Goldman—he gets it. |
The rest? They did well on the exam somehow. But I look at them and think about the future they're inheriting. |
A market 100% overvalued by every metric. Fed liquidity running dry. AI displacing jobs. Inflation that won't die. And nobody's preparing them for what a real drawdown looks like. |
They've never seen 2008. They've never experienced 2000. They thought Friday's 227-point drop was a big deal. |
It wasn't. It was day one. |
The Average Drawdown is 16% |
I showed this to my Genesis COG members this week. Historical data going back ninety years. The average annual drawdown hits 16.3%. |
Not the median. The average. Which means we're mathematically owed at least 15% more pain from current levels just to hit normal. |
And we're not in normal territory. We're in historic overvaluation territory. |
But here's what kills me. It's not the numbers. I can handle math. The math is just gravity. Numbers don't lie. |
It's the exhaustion. |
Every morning I wake up knowing exactly what I'll see. Tech or financials propping everything up. Zero DTE calls making it all seem cheap and accessible. Retail rushing in like Pavlov's dogs. |
The same video game booting up. The same algorithm-driven patterns. The same narrative-based price action that has nothing to do with fundamentals. |
Friday was different. Friday showed the first crack in that force. The first disturbance that tells you something fundamental shifted. |
When the Force Breaks |
My daughter's twelve. She'd play Roblox eight hours a day if I let her. Last week I took her phone away. The addiction is real. The dopamine hit is real. |
This market's the same. People are conditioned now. They've been trained to buy every dip. They anchor to recent highs and think 6,500 is a bargain because the market was at 6,700 last week. |
The algorithms don't anchor. They calculate. They measure probability every millisecond. While you're married to your cost basis, the machines are preparing for mean reversion. |
And mean reversion to the 50-week moving average? That's 700 points from here. On one contract. That's $35,000 gone. |
Some of you have five contracts. Ten contracts. Do the math. |
Being Prepared Doesn't Mean You Won't Lose |
I'm not sitting here claiming I'll dodge every dollar of drawdown. I won't. |
Being prepared doesn't mean you avoid losses. It means you mitigate them. You define risk. You have stops in place. You don't carry 100% positions in one direction. |
The worst thing in this business is having no game plan. If you fail to plan, you're planning to fail. |
I'm raising cash. My longs are breaking out—Budweiser, Gap, things you don't own because they're positioned for a consumer recession. I'm lightening long exposure because I'd rather be wrong and prepared than right and broke. |
This is what we work on in Genesis COG. Not predicting. Preparing. The system doesn't care about hope or anchoring or what CNBC says. It follows the mathematical patterns the algorithms leave behind. |
Standard deviation channels. Linear regression. Bollinger Bands. They all point to the same destination: 5,300 to 4,800. |
Could be wrong. The judge could have ruled in my favor this week too. |
But I'm not betting my account on hope. And I'm not betting on algorithms saving me on the way down. They save you on the way up. They abandon you in free fall. |
This Weekend, Step Back |
Turn off the screens. Stop checking positions. Take a breath. |
Salt Lake City just got ranked the best city in America to move to. Forbes said so. My wife loves Chicago. My daughter's in school. But when she turns eighteen? I'm packing the car like the Beverly Hillbillies. Heading somewhere warm. |
Because Monday starts again. The video game boots back up. Tech or financials or commodities doing their thing. |
And you need to be sharp. Not exhausted. Not emotional. Not conditioned to chase dopamine hits. |
That's their edge—the algorithms never sleep, never tire, never hope things get better. |
Your edge? Knowing when to step back. When to protect capital. When to listen to the math instead of the narrative. |
I appreciate every one of you who shows up to learn. You could be anywhere. But you're here. That means you're thinking differently than the crowd. |
If you want to see how we're positioning for what's coming—the signals we're watching, the levels that matter, the systematic approach that removes emotion from the equation—take a look at what we're doing inside Genesis COG. |
Have a good weekend. We'll tackle whatever Monday brings together. |
Professor Jeffrey Bierman
Creator of the Genesis COG System |
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