What do you do when the stock market sh*t hits the fan?
Be honest.
Do you tend to freak out and panic into quick exits? (if so, you aren’t alone!)
Do you recoil in fear and call it “zen detachment?” (there are more of these than you know!)
Do you get busy reading everything you can, talking to everyone you can, and watching all the financial TV you can to try to figure out why this volatility is happening?
Do you stoically go down with the ship turning your trades into investments?
We all have our different ways of dealing with the mental volatility that stock market volatility stokes in all of us. These past couple of weeks have revealed new things to ourselves.
These tapes are a perfect time to hunt for leadership. More often than not, when the tide inevitably shifts back to a buyer-driven market, the assets that showed strength in a weak tape continue to lead.
While on this recent correction the selling has been indiscriminate, we're spending the next week or two to assess any relative leaders.
Two days into a recovery, we've seen the DePIN and memecoin space show some leadership. Today's note covers a few tokens within these groups leading this strength, as well as providing a brief market update.
In order to have a bear market, or a correction of any kind, the prices of stocks need to fall.
That's just math.
But you know what hasn't happened? We really haven't seen the new lows list blowing up at all.
You would think that Monday would have seen a lot of new 52-week lows, considering the VIX practically tripled overnight, for the first time in the history of the stock market.
Crypto volatility has surged once again, and it's understandable if you're feeling stressed from this recent move.
If you’re holding crypto assets, you might be experiencing a significant drawdown. This volatility is a natural part of the investment journey in this asset class. It's to be expected you'll weather these drawdowns in crypto.
During turbulent times like these, it’s crucial to recognize that heightened emotions can cloud judgment. While it’s perfectly normal to feel stressed during a downturn, it’s important to be aware of how these emotions can impact your decision-making.
Amidst the noise and speculation, our goal today is to provide clarity.
In this report, we’ll contextualize the recent sell-off with historical data and outline a data-driven strategy to navigate the current landscape. By focusing on objective analysis, we aim to help you make informed decisions and maintain a steady course guided by data, not emotion.
In the case of crypto, people will try to tie the action to the presidential odds or geopolitical tensions. And while I'm not denying their existence, it's not really surprising that these developments are coming out after Bitcoin retested its former highs.
It's why we switched our short-term bias to neutral on Monday; it pays to follow money flow.
Putting all this aside, there are still some winners. Not everything is a complete catastrophe.
Instead, some of the smart wallets on-chain are actually buying a few tokens here. That's what we explore in this week's video.
Welcome back to Under the Hood, where we'll cover all the action for the two weeks ended August 2, 2024. This report is published bi-weekly, in rotation with The Minor Leaguers.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names.
There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: a list of stocks that are seeing an unusual increase in investor interest.
1) For long-term investors, this is what you want. Many of us have long-term accounts, retirement stuff, kids college funds, etc. This sort of market action is great for those types of accounts and strategies. And if you're a young investor, just getting going in this business, nothing could be better. Pay attention and take notes (you'll thank me later).
2) For more tactical portfolios, this sort of volatility provides new opportunities, that certainly did not exist in the low volatility regime that we've been in for so long. This is not the time to implement low volatility strategies. This is a time to benefit from the high volatility.
3) When shit hits the fan, just get smaller. Markets are moving fast, so you can get away with much much smaller position sizing in order to accomplish the same goals you had with a VIX at 10, just a month ago.
The rule of thumb for me is you take the VIX and divide it by 16. That gives you the expected % move for the market that day - particularly the S&P500.
