Month: May 2022

The other day I listened to an NPR story about some guy who bought 6K worth of AMZN stock in his eTrade account in the late 90s. He decided to forget about his account and check on it 20 years later like Warren Buffett teaches – buy strong companies you believe in and forget about them. When the guy checked his account 20 years later, it was empty. He called eTrade. They told him that the state of Delaware seized his account in 2008. States do that when you don’t check your account for a certain period of time (three years in many states). He called Delaware’s unclaimed property department. Turns out they sold his shares in 2008 and were holding the money for him – $8k. The guy was furious. His AMZN shares were supposed to be worth over 100k when he checked. 

The moral of the story. 

1. Check your brokerage accounts once a year.
2. Go to google and type “lost money” +” any state you have ever lived in”. Go to the unclaimed property section of that state and type your name. You might be surprised to find that you have unclaimed money from checks, bank accounts, and brokerage statements. If you find a match with your name and a recognizable address, you can file a claim to get your money back. There are billions of dollars that the States keep as unclaimed property.

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As widely expected, the Fed raised interest rates by 50bps and started to reduce its balance sheet. The initial enthusiasm last Wednesday was immediately followed by heavy selling the rest of the week. One day up 5%, the next day down 6%.  Excessive volatility which means a lot of choppiness and frequent reversals is a typical price action for a bear market. 

Tech has been dismantled this earnings season. QQQ is trading below its volume-weighted average price since the Covid lows in March 2020. The small-cap growth ETF – IWO, has given back its entire profit for 2021 and 2020. The rips to declining 20 and 50dmas keep getting shorted on a regular basis. We are yet to see the real panic in the tape. So far, the selling has been slow and steady – the kind that can continue a lot longer than most expect. 

There are slim pickings on the long side – oil and gas names are holding the best as crude oil is setting up for another potential breakout and natural gas is at 12-year highs. If the market is really worrying about a global recession, oil and gas will also get eventually hit but until then, they are in an uptrend and uptrends tend to keep going higher until there’s a high-volume breakdown that changes the sentiment/narrative.

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April was four weeks of relentless selling for all major indexes. Small caps Russell 2k (IWM), large caps S&P 500 (SPY), the Nasdaq Composite which includes 3,000 stocks made new year-to-date closing lows. In fact, all of the above with the exception of SPY, have fully erased their entire 2021 gains. SPY has held better thanks to the Q1 strength in basic materials, energy, and consumer staples but even those sectors have been under some pressure lately. In a bear market, eventually, they get to every sector. There are no safe places to hide. The picture is not pretty but it is not surprising either. Last week, we talked about the recent tendency of stocks (especially tech) to sell off ahead of FOMC meetings. There’s a new one scheduled for the next week – May 3rd and 4th. The big question is do we get the usual post-FOMC bounce or will this time be different? The main indexes are on the brink of breaking down and having another leg lower. If the Fed doesn’t tone down its stance on future interest rate increases, look below. 

The earnings season has just begun. The big theme so far is resetting expectations. Juggernauts like Google and Amazon, which everyone thought were invincible, missed estimates. Apple beat them but gave wide-range guidance citing supply chain challenges in China and the market sold it anyway. Tesla dropped 20% since its best earnings report ever as Elon Musk is raising money to fund his Twitter purchase and short-sellers have smelt blood in the water. If those major stocks can get hurt, no one is safe. This is why market sentiment has turned quite bearish. Many have already reached a point where they just want out of the market. Hitting everyone’s favorite stocks will do that.

Try my subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 40 list of market leaders, and much more. See some of the recent testimonials.

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Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.