I do not know what is going on, but the trend of formerly high flying stocks getting absolutely clobbered in a day or two is continuing this week.
It was just one of many things we mentioned in Sundays “Quit Rate” T-Report. The magnitude of the drops, not only on a percentage basis, but in market cap terms is jaw dropping.
I am not sure what is changing Fear of Missing Out into Look Out BelOw, but it seems to offer some important insights into the psyche and structure of this market. Some of these stocks are at 52 week lows, others, despite sharp declines are still up significantly in the past few weeks.
Yes, short interest in ARKK (for example) is high and SARK has launched (some form on an inverse ARKK), both generally contrarian signals, but signals that I cannot convince myself to latch on to at the moment.
While I admit that LOBO is a bit weak, I couldn’t find anything that was the opposite of FOMO and didn’t feel like working my favorite word (schadenfreude) into this quick note, and while LOBO might be weak, Look Out BelOw seems worth mentioning.
The only two things I will add:
Craziest thing I noticed while trolling social media was that there was volume in the November 19th, $50 strike TSLA put contract. No, that is not a typo. It is the put option that expires next Friday with a 50 dollar strike (yes fifty, not five hundred). Who in their right mind would buy that? That is the first question. The second question, less obvious, but if you think about it, is just as important, why is someone bothering to sell this lottery ticket. While a $50 strike, expiring in a week or so, seems ludicrous, it makes you wonder what else is going on in the options markets and how much these obscure options trades are driving stock prices (relatively few people seemed to care when gamma squeezes drove stocks higher, but what if they are now adding to the downward pressure and go a long way to explaining the LOBO reaction some stocks have been facing.
Crypto. I said ahead of the Fed (and incidentally, ahead of the Bank of England) that crypto has been rising, in part as an admonishment of loose central bank monetary policy. While there is no reason for that admonishment to stop, FOMO has played a far bigger role in the rally in crypto (with central bank loose money as an intellectually viable rationale for submitting to your FOMO). Should crypto LOBO here? I think so! Back to the bear side of things for me on crypto.
This market is anything but easy to navigate and the daily “new all-time high” headlines, while appealing, do little to focus our attention to some violence that is occurring just below the surface.