Market Radar12. January 2023
Market
Nobody wants to be the black sheep today.
Today at 14:30 German time, new consumer prices are reported from the USA. One hour before the start of trading, there is likely to be increased volatility. An up or down gap with the stock market bell ringing is likely to be much more likely in the US stock indices than an opening close to yesterday’s close of the day. Currently, we are still stuck close to yesterday’s closing prices (as of 1:30 p.m.).
If there is an up-gap, I actually expect profit taking pretty quickly. The markets are overbought, so that buying is unlikely to continue unchecked.
If there is a down-gap, then many scenarios are possible.
A down-gap would be more unpredictable for active traders. Traders want an up-gap to be able to make cash.
The TRIN indicator (Term Trading Index”), applied to stocks in the S&P 500, showed an extreme value yesterday. Yesterday we saw that the volume of stocks that were sold was significantly lower than for stocks that were bought. Stock market participants were therefore in a betting mood yesterday: they are betting that consumer prices indicate that inflation will continue to be slowed down somewhat.
As is the case with betting: the most can win is the one who positions himself against the crowd – i.e. yesterday at the close of trading went short. Of course, he is only a winner if he is right. If he is wrong, he is one of the few losers among the many winners. And since nobody wants to be the black sheep, almost all market participants went long yesterday at the close of trading.
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What do we see under the radar of the major stock indices?
The zombies can celebrate a bit – short sellers realize profits
Yesterday I watched FinViz show the US stocks that currently have the highest short float. The only other scan criterion: The stock should have a market capitalization of over 300 million US dollars.
The short float indicator indicates the percentage of outstanding shares lent to short sellers. It is generally said that from a short float of 6%, the short selling ratio influences price behaviour. Buying attempts are strangled relatively quickly by the short sellers – a stable trend upward movement via “buy the dip” follow-up purchases is practically impossible because the lows are (should) be undercut again and again. In practice, consolidation within a flat base below the last high is not possible.
One could speculate on a short squeeze from a double-digit short float. Since the beginning of the year, we have seen many such short squeezes. With the losers of the past year, the short sellers realize their profits at the beginning of the year. This “adjustment” usually takes about three trading weeks.
So let’s briefly dive into the world of zombie stocks:
The stock with the highest short float is currently – no wonder – Silvergate Capital (SI). The short float is just under 60%. However, this stock takes on the role of a black sheep, because among the ten acts with the highest short float, Silvergate Capital is the only stock that has been in the red since the beginning of the year.
Bed Bath & Beyond (BBBY; Short float: 43%) rose by 68.6% yesterday!
Beyond Meat (BYND; Short float: 40%) has risen 30% since New Year’s Eve.
Upstart Holdings (UPST; Short float: 39%) is up 17% year-to-date (Upstart Holdings lost 91% in 2022).
Most of the time, yesterday’s losers are likely to be tomorrow’s losers. Reputable long traders are unlikely to enjoy profits in these stocks since the beginning of the year. But one or the other gambler maybe.
After January 20, this spook of stock zombies should probably be over.
The silver price is in a nail-biter – but silver mining stocks continue to rise
After the lower low, the silver price has now also formed a lower high. Is there now a threat of a longer consolidation?
Silvercorp Metals (SVM) shares are rising from high to high unfazed. Wheaton Precious Metals (WPM) reached a new interim high intraday yesterday, but could not defend it at the end of the day. SSR Mining (SSRM) is working on a constructive-looking flat base.