Trade Alert: Will Volatility Beget More Volatility? Probably.
Will volatility beget more volatility? Or, as has been the case for the fifteen months, will the indices just power right onto new all-time highs? Will the SPACs ever recover with any gusto? Will the small cap tech stocks get any mojo back that lasts more than a couple days or so?
These are the questions for traders. For investors, especially for Revolution Investors, not much has changed. We still focus on finding the most Revolutionary companies on the planet and we still invest for the long-term, planning to hold most of our stocks for a very long time.
My eyes are both doing well and I’m back full speed reading and feeling comfortable writing on the computer finally today. My best guesses for answers to the questions above:
Will volatility beget more volatility? Yes, probably. That’s usually how it works as the emotions of the traders start to feed upon themselves as people chase intraday highs and puke into intraday lows, exacerbating the moves in either direction. Large candlesticks, lots of volatility often mark mid-term tops. We’ll have to see if there are any more scare-the-bulls kind of sell-offs in the next few days. I expect there might be.
Or, as has been the case for the fifteen months, will the indices just power right onto new all-time highs? Maybe, but unlikely to do it the same kind of oomph that the market has had for the last 15 months. The next fifteen months won’t be like those last 15 months, that’s for sure.
Will the SPACs ever recover with any gusto? Case by base basis, some will. Many are headed much lower, especially the fraudulent ones. The companies that promise to have real revenues in five years based on still-developing technologies that came public via SPACs are also in trouble. Some recent SPACs will head much higher. Many of the SPACs that negotiated deals back at the highs in February and March with companies that are speculative but that haven’t gone public yet are probably overvalued, as those deals were negotiated at the tippy top of the Blow-Off Top Phase. They are in a vicious cycle here, because if they announce a lower, more reasonable valuation before they go public, the markets might not like that and the deal might fall apart. On the other hand, if they come public at what are now looking like wildly high valuations based on how far most small cap tech stocks and SPACs in general have fallen since those highs (most are down 50-70%), the stocks are primed to fall to those more inline valuations when the deals commence.
Will the small cap tech stocks get any mojo back that lasts more than a couple days or so? Maybe, but it could be a grind sidewise and/or lower for weeks if the mojo doesn’t last through this week.
A couple housekeeping Trade Alerts to mention here. As I mentioned I might in the transcript I sent out last weekend, I bought a small tranche of Virgin Galactic back when SPCE was below $30. And as I have often mentioned I would, I bought a little bit of bitcoin and ether when they hit my “Where I’d buy more” price targets of below $30,000 and below $1800 respectively. In the hedge fund today, I’m buying a few puts and hedging a little bit around the edges a little, including on the solar stocks like SUN and SPWR that I’d covered last week, but I’m mostly sitting tight overall.
