VRA Weekly Update: SPACs in Focus. Chinese Stocks Under US Regulators Microscope. VRA Market Notes.

Good Thursday morning all. Market softness continued yesterday, following a solid open with good internals, as mid-day selling pressure took the Dow from +320 to slightly negative at the close. Nasdaq weakness was pervasive throughout the day, taking the index -2% at the close. We will note an important difference between Tuesday's trading (where NYSE volume was 8:1 negative with Nasdaq advance/decline readings were also 8:1 negative) to Wednesday's trading, where even with losses that were greater in Nasdaq the worst reading we saw yesterday was 3:1 negative. At the same time, we must note that yesterday's trading marked just the 3rd time this year that internals were negative across the board, yes even in new 52 week high/lows which came in at 130–416. The primary culprit? SPAC’s. 

While we do our best not to rationalize indicators, just as we pointed out as our internals were soaring, we’re now seeing weaker internals, with the largest divergence linked to SPAC’s. Remember, each SPAC is listed 3 times; common, warrants and units, making their trading, in both directions, as having exaggerated readings. SPAC’s have been breaking their initial offering bids of late, left and right. Not coincidentally, this morning we have news from the SEC that they are “finally” investigating Wall Streets role in promoting these “not ready for prime time” new listings.

U.S. regulator opens inquiry into Wall Street’s blank check IPO frenzy: Reuters

Also, a bit of ground shaking news is breaking on Chinese co’s that trade with a dual listing in the US. Following Trumps lead, US regulators will begin “accounting/financial audits” of random Chinese stocks, with the very real threat of “delisting”. It’s about time. If you’ve yet to see the documentary “The China Hustle”, this is an excellent time to do so. 

Chinese tech stocks hammered as U.S. law threatens delisting on American exchanges

VRA Market Notes:

As our pre-Q2 shakeout continues, the Fear & Greed Index has now fallen to 40, a reading of “fear”. As contrarians, this is exactly the action we want to see.

Excellent follow (Urban Carmel) tweeted this last night. Following Tuesdays equity only put:call ratio of 39 (extremely low), the burst back to 57 yesterday has marked a level that has seen the S&P 500 ramp higher on all 3 prior occasions this year.

And from our good friends at the Stock Traders Almanac, the month of April is undefeated in its bullishness over the last 15 years with an avg gain of 2.9%, making April the best month of the year (for the Dow Jones) since 1950. 

“Since 2006, April has been up fifteen years in a row with an average gain of 2.9% to reclaim its position as the best DJIA month since 1950. April is second best for S&P and fourth best for NASDAQ (since 1971).

Why I Remain So Optimistic

We know each other well enough to know that we are in a constant state of concern about this Biden-Harris presidency & the communist attack that’s underway against America. Even as I remain overwhelmingly bullish on stocks, the fears lurk. 

But I also know that while their side may have the momentum, along with key America-haters in positions of power throughout govt, media and our schools/universities, I also know that America-lovers have the numbers. 

And while I can’t tell you who it might be, someone, or a group of someone’s, is going to rise up against this communist onslaught and take our great country with them. 

I view this as “high probability”. 

We’re at our best when our backs are against the wall. I’m seeing regular people, non-political people, getting red-pilled. Frequently. 

Maybe it was always going to take an actual & immediate threat to wake us up. But we all see it, right? Think about the number of people you know that are mad as hell. 

And because, in at least some large part, of my confidence in Patriots successfully taking back this country, we must remain aggressively invested. 

We know the rest of the reasons to be bullish; This is a new bull market. Liquidity. Earnings. GDP. Massive numbers of technical/Momentum indicators on buy signals, here & abroad. 

And what has to be my top bullish outlier; We’re living through a PSYOP. This is part of their plan. Who’s going to be concerned about the truths re coronavirus…or a stolen election…or the massive onslaught against our constitutional rights, when our most comfortable & well off citizens are manking bank in the stock market, crypto’s & with their real estate gains?

Things tend to look pretty ok if you’re living well. It’s just human nature. And they know how to manipulate our nature. 

This is almost certainly a PSYOP. Love or hate that potential reality, you can’t argue with the outcome to date: Flawless execution. 

Granted, its an odd reason to be bullish…nonetheless, I recognize a repeating pattern when I see one. 

VRA Market Update

Here’s whats taking place. This is the evolution of the major move higher thats directly ahead, into what will be excellent Q1 earnings, immediately followed by what will be a massively killer Q2.

We’ve seen this movie countless times. 

In advance of a coming, major move higher, shake-outs are not just common…they are to be expected. 

We saw it from the global lockdown fears this week, with negative internals and weakness across the board. The shake-out was on…sucking out the weak hands.

But once the internals begin to flip ( it will be led by Semis/Nasdaq and small caps), we’ll begin to see the BIG money jump in. 

Forecast: At some point in the next 1–3 days we should wake up to see futures sharply higher. And those gains will hold. That will be our tell. From there we zoom higher into early April, with the flood of new money that will be flowing into stocks.

Until next time, thanks again for reading…

Kip

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