Welcome to the Yeet, a weekly DD. Think newspaper...kinda.
This first one is pretty long as I’m setting the table, so you can read it all or you can take what you need: Part 1: Week in review Part 2: BlackRock-Ageddon (with help from @urinsideman) Part 3: Week in review continued, and looking ahead Part 4: Sentiment reads and of course, Whales to Watch & RAMBOs (charts from SpotWolf @deltagammaqueen), Part 5: SPY forecast from (from @daarkmaagician, his discord here)
This is not financial advice nor am I-- or anyone who contributes--financial advisors. We are just people in the game like you, and the goal is to entertain while giving you a few ideas and a fresh perspective. Please do your own research before yeeting a pick.
Now that you can’t sue me, let’s get to it.
Pt. 1: Ghosts & Imprints 👻
I don’t believe in ghosts...but I swear it’s rubbing off. See, my girlfriend is a tried-and-true believer, the type with a story to tell on every occasion. If you’ve ever chatted with the ghost folk, you know a good story typically involves someone who’s been dead for like 5 years--or 5 decades--suddenly coming back in another form to fuck things up. That’s where we begin.
Believers in ghosts are convinced that traumas of a past life dictate our present and future--fear becomes the operating currency, and now our market is behaving like it’s been hearing campfire tales. Amidst a blistering bull run we’ve finally ceded ground to the bears, and it’s been a mad rush by the Robin Hood gang to find the phantom culprit stealing the profits. Shook, retail is sleeping with the night light on, haunted by the death of growth tech and a rising yield curve lurking under the bed. Red days? Must be supernatural!
Well, like I said, I don’t believe in ghosts...but it’s rubbing off. Personally, I now believe in “imprints”; the supernatural theory that an event so unsettling can occur it leaves a mark we experience in the here and now with our senses...and we react accordingly. I think it’s the best way to explain the past week—fearing ghosts but really feeling imprints. Here’s what being touted, with a spooky 👻 scale:
Inflation: Okay, The Great Inflation did happen. Boo. And yes, Venezuela did just introduce a million bolivar note this month worth 52 cents American. Lol. But, in a US economy that hasn’t been able to reach target inflation (2%) in forever (not for lack of trying), current fears are probably much ado about nothing. Sure, there will be some groans over the true value of corporate profits, but milk won’t be $12 a gallon tomorrow. Especially if you believe The Treasury Secretary, The Federal Reserve Chair, and International Institutions saying not to worry. Okay, maybe that’s reason for us to worry, but any broad market movement based on this is premature. Spooky factor: 👻👻
The specter of outflow in growth stocks: is also hanging around. And yes, since September, growth tech companies have been getting the smackdown, trailing the DOW considerably. It’s logical, right? All those tech pumps eventually had to get dumped and the economic benefits of reopening are, literally, just a shot away. So, the intense buying of the low p/e companies trading way off their highs makes total sense, but the recent selling and bonkers intraday price action of the last week still does not. The DOW was propped early in the week by oil when a ship got stuck in a fucking canal. Wednesday’s red across the board saw growth tech as the strongest performer, with industrials/cyclicals/financials as the laggards. What rotation leaves the winner behind? Spooky factor: 👻👻👻
Yield Curve, Quantitative Easing & Interest Rates Super Team: “Yield curve” is the latest phrase of fear, but...yawn. Not going into the myriad details of inverse stock and bond price action; because that shit is boring. “I don’t understand it, and I won’t respond to it.” But, color me surprised that somehow, some way, indexes across the board went bigly green Friday while the yields ALSO went higher! Gasp! So then, those pesky yields are out as our boogeyman. Not to mention their rise is a good sign of a broadly healthy--rather than purely speculative--market. Spooky Factor: 👻👻
I don’t believe any of these big bad ghosts are the cause of our current volatility; they’re faint imprints of market’s past leading to doubts in retail and some splashy headlines. More than imprints, when it comes to explaining the unexplainable, I’m an old-fashioned skeptic who leans toward human tinkering; something more like phrogging... or the Scooby-Doo villain under the white bedsheet. There is, however, a likely reason for current volatility with a 👻👻👻👻👻 spooky factor, and I’ll get to that after I tell you about BlackRock-Ageddon.
Pt. 2: BlackRock-Ageddon 🌋
(assist from @urinsideman)
Up too late the other night, I found this odd-sounding article titled Clean Energy ETF May See Big Overhaul. What it meant was so amazing I did not believe it:
In the latest consultation, SPDJI is now planning to increase [their holdings] minimum to 100, more than tripling the current number of companies featured in the index. This will have a major impact on the exposure of the world’s largest clean energy ETFs, the $7bn iShares Global Clean Energy UCITS ETF (INRG) and the $7bn iShares Global Clean Energy ETF (ICLN).
You’re probably thinking “...oh...um...okay. Whatever?” Well, let me break this Greek down. These BlackRock ETFs (INRG and ICLN) track the S&P Clean Energy Index, and because the index hasn’t been updated in 14 years, it only has 30 holdings. The new rule proposal means that ICLN/INRG (the BlackRock ETFs) will be required to expand from 30 tickers...to 100...right now.
So, BlackRock currently owns WAY too disproportionate a weight in a small basket of stocks that got pumped during the Biden boom post-election (see: PLUG chart). The BlackRock ETFs currently have a stake of 8% or more of EACH of almost a quarter of the stocks in the Index. This rebalance means that on a massive scale and in a specified time frame, ICLN and INRG are compelled to sell and buy hundreds of millions of dollars worth of stake in EACH of the companies already in the index it follows, AND they would PURCHASE initiating stakes in up to 67 other companies.
I found a document from SPDJI called a “consultation” that lays out the process. The next morning I e-mailed SPDJI representatives to confirm, and they replied with key information.
My email chat with SPDJI confirming dates and processes
So, there it is. On the 19th of April, according to the criteria listed, 67 new companies are being added to the S&P Clean Energy Index--the underlyings of which are to be purchased in large quantities by the BlackRock ETFs. As 42 Dugg once rapped...IT GET DEEPER.
Investment Firm Société Générale released a memo to their clients breaking down the financial implications for current ICLN and INRG holdings--what BlackRock’s gotta buy, and what they gotta sell. As of this writing they have not answered my calls--apparently the SpotRambo name does not carry much international clout--but this FT Article had some info on winners and losers currently in the ETF:
This would mean the iShares ETFs (BlackRock) would need to pump more than $400m into each of Vestas Wind Systems, Orsted and NextEra Energy, as well as large sums into Chinese groups such as China Longyuan Power, Xinjiang Goldwind and GCL-Poly Energy.
This buying spree would be counterbalanced by a wave of disposals. The ETFs would need to sell $405m worth of stock in New Zealand’s Meridian Energy, SocGen estimated, equivalent to 47.6 days of typical turnover.
For the US-listed American depositary receipts of Brazil’s Companhia Energetica de Minas Gerais, the implied selling of $248m of stock would represent 57.7 per cent of the free-float market capitalisation, SocGen said.
Whoa! This is a lot of critical information. Recap:
What we know: On 4/19, The S&P Clean Energy Index is undergoing a massive overhaul and adding 67 fresh stonks. BlackRock ETFS ICLN and INRG track this index, and will therefore participate in a frenzy of buying and selling on/before/around that date.
What else we know: New purchases and redistributions--LITERAL pumps and dumps--are a requirement for the BlackRock ETFs. According to SocGen, this includes among others: $400m pump for NEE, and extreme dumps for CEG and others. Pumps and dumps so large that they represent 40-50 days of the stocks natural trading cycle.
What we’re pretty damn sure of: My mans @urinsideman has been helping me out with some digging. We are pretty damn sure PLUG will go down HARD after their epic run-up once BlackRock divests to spread the wealth. We are also looking at VST as an addition to the index based on call flow and fundamentals.
What we’ll do: Next week we’ll give some winners and losers. I will keep calling SocGen (sometimes with fake accents to be more convincing), trying to get the report. For now, we are looking for clean-energy infrastructure excitement to provide a run on these stocks this week, making it even more juicy to grab some quick shorties.
ELI5: BlackRock ETFs ICLN and INRG have to buy and sell a bunch of stocks due to the indexes those ETFs track undergoing a massive overhaul. It will cause major volatility, produce some big winners, and some even bigger losers.
Anyway, where was I? Oh yeah, Phrogging and Scooby-Doo...
Pt. 3: A Box of Chocolate Momo Phrogs
Quarterly rebalancing, like phrogging, is kind of a pseudo open-secret; everybody knows it happens, but when shit hits the fan people don’t ever want to believe it’s the culprit--at first. I was able to recall this a bit early due to this excellent Bloomberg article. Not only are we seeing the effects of quarterly rebalancing in the markets, but it’s a particularly violent one. Momentum quants (people smarter than you or I who use BIG MATHS to trade) are taking profits from a year-long tech run and positioning into downtrodden, upcoming value winners--but in coordinated pockets. I’m likely butchering some details, but generally it’s a forced strategy that leads to simultaneous, specified selling and buying, making it impossible for retail to make speculative picks. So yes, kinda rotation, but more varied, deeper and consequential. It obfuscates.
Source: 3Fourteen Research report dated Feb. 25. Data based on 12-month price change assuming constant prices for future dates.
All that means a potentially turbulent rebalancing is coming this month across corners of the $2 trillion world of factor investing…These quant moves can ripple through broader benchmarks. Momentum is popular within the roughly $2 trillion systematic community which groups stocks together by their characteristics, an approach known as factor investing. Exchange-traded funds tied to momentum command $20 billion in the U.S. alone.
This would explain that weirdly coordinated movement of very specific sectors we’ve seen that I mentioned in pt. 1. Admittedly, it’s a confluence of factors causing this--the “imprints” mentioned have stoked the fear leading into the past week...but there was no true ghost. What we’ve feared--the various ghost distractions touted by media--has been the Scooby-Doo villain under the sheet all along! Those danged momentum quants and their pesky rebalancing! 👻👻👻👻👻
Pt. 4: Speculate. 💭
Whales to watch w/ some charts, and RAMBO next week (all charts provided by SpotWolf-- @DeltaGammaQueen)
Note: Rebalancing isn’t “officially” done until the new month, but we’re almost there. Wait for entries, and don’t buy any calls dated before 4/23 if you can resist. Anyway, here’s some Whales to Watch:
BUILD ($X, $RAIL, $MT, others)🚀🚀
Last week’s Whales to Watch preached two things in this environment--patience and infrastructure. I mentioned flow into infrastructure in the DD last Friday, news of the infrastructure plan broke Monday, and holy shit did things go OFF this Friday. It already ran, so patience on entries, but hop on the train….literally.
VROOM (EV: FSR, NIO) 🚀🚀
I know, I know...EV has been getting beaten, revived, and beaten again. But, The Bloomberg NEF RAMBO this week is a natural pump for a bunch of EV names-- given their price action, growth potential, and the fact their CEO Henrik LOVES TO PUMP, the whale action on FSR is most convincing to me in the sector along with NIO. Plus, NIO and TSLA report sales sometime in the next week or so. It’s risky because there may will be outflow toward the end of the quarter aka the beginning of next week, but I like a safe-dated play here to get in on the catalyst.
GLOW: (Uranium, CCJ, DNN) 🚀
This is more an idea for longs, but it’s a tasty one. Uranium is, surprisingly, going to sneak its way into the discussion as alternative “clean” energy. Additionally, the options activity around the sector including UUUU and DNN has been frenzied. Upcoming “clean” infrastructure bill inclusion could also explain the absurd open interest on CCJ 4/16 and 4/23 calls, coupled with deep outside the money betting. But, if you’re looking for truly idiotic YOLOs—the bang or bust shit— I’d look at DNN.
SMOKE: (WEED: TLRY, APHA, ACB)🚀
Scared of the markets but still want to speculate with high-risk, high-reward? Weed is still pumping, for better or worse, and outside the money activity is ringing on my scans every day.
DIG: (Miners: GDX, CLF)🚀🚀
You can pretty much take your pick on any of the mining stocks--they’re all pumping. Macroeconomics 101: as money supply expands into markets, commodity booms generally follow. Risky calls may be premature here, but shares held for general speculation and as a hedge against those pesky inflation fears could be a good move.
Cha-Ching: (Banks: XLF)🚀
Powell and The Fed eased capital restriction requirements for banks. Trying not to overthink it, and considering safe, minorly profitable calls and longs in the XLF etf so I don’t have to worry about individual performance with a full docket. Some hedging has popped up since these calls, but I will ignore it since it doesn’t give me confirmation bias lol. They were also probably people bracing for the opposite decision.
Random RAMBO whale play I like: KR Investor Day: These boomers have burned me recently, but I may dip a toe in for them pumping their transition to online/delivery services.
Random RAMBO that’s totally sink or swim and I’ll maybe throw a small lotto: BIIB
Throwing the Ghost? May YEET at CRM since it has some juicy activity even though it’s dead. We’ll see what kind of dip opportunity, if any, presents Monday.
It’s a short week but we got a whole lotta events for next week up on SpotRambo.com. More at 5 PST tonight (Sunday)
Pt. 5: Weather 🌦️($SPY forecast provided by @daarkmaagician)
Below is the chart & info for a SPY forecast from @daarkmaagician, whose been frighteningly accurate in the year or so I’ve known his stuff—I asked him as a legit favor and he obliged. I’ve attached the accompanying text as an image with the photo below.
Green= DP Buys Red= sells Orange=ATH Light blue= 9ema Dark Blue= 50sma
Here is some writing from my boy Dark Magician explaining in more detail
Here is the link to his Discord and you can DM in there for full access!
Pt. 6: Goodbye ✌️
TLDR pt. 1: Current fears of inflation, yield rise, and rotation aren’t an explanation of this week’s market movement.
TLDR pt. 2: BlackRock-Ageddon: ICLN and INCG are undergoing a major rebalancing. PLUG and CEG are likely losers while NEE and VST could boom.
TLDR pt. 3: Quarterly rebalancing exacerbated by momentum quants has played a key factor in a red week, but we’re almost out the woods.
TLDR pt. 4: Tickers in Infrastructure, EV, mining, uranium, financials, and weed could see a good month after rebalancing, or even as we finish next week.
So, there you have it. The YEET no.1, Ghosts. There is so much more I want to say and so many more notes I have, but this thing is a fucking novel already.
Humongous thank you to SpotWolf @deltagammaqueen (ticker charts) and @urinsideman (BlackRock research), and @daarkmaagician for an excellent SPY forecast. And of course my partner 🧠 for making me do these.
If you enjoyed this, let’s do it again next week and tell a friend. And if you’d like to help out or have something interesting, message me @yourboymilt or /u/alldatdalton on reddit. Cheers.
-M