Market Update for the Week Ahead
Welcome back to VIG’s The Juice, our lens into the future using signs from the options market. We aim to break down which sector the money is flowing, where are the biggest plays, and what the whales are doing. Let’s dive in.
Markets - Overview
The day was Tuesday February 22nd. Russia was on the brink of invading Ukraine and the futures market was pointing to a huge sell off at the open. The signs were there and it was starting to look like one of those “do not open your portfolio” kind of days. Good thing we didn’t because by the time the afternoon hit the market had seen a reversal of meteoric proportions. In fact, the Nasdaq was down more than 3% at one point before the buy algos turned on and we veered much higher to end the day over +3%, a 6% swing!
If you don’t understand what is going on then you must be new here. This is how the market works in 2022, good news is bad news and bad news is good news. We closed the week with a (much needed) green finish as most stocks were hitting pretty high on the oversold gauges. Here’s how some popular names closed on Friday.
The greenest of green, some might say. What else was going on and what sectors are heating up, you ask? Let’s take a look at the option flow from Friday’s action in the “top sector ETFs” watchlist.
The most bullish sectors were precious metals (gold) and the energy sector. There is a huge amount of uncertainty revolving around what is going to happen with oil supplies as Russia becomes entangled with sanction after sanction. Players might be setting themselves up for a spike in volatility around the energy sector and are placing their hedges accordingly.
Markets - Crypto Currencies
Furthermore, Russia was just removed from the SWIFT banking system which would usually facilitate the international transfer of money. Now that they are OUT liquidity will be low and the Russian banks may be forced to convert other assets into the Russian ruble. This is also coming off the back of Canada’s decision to freeze the assets of significant contributors to the trucker protest movement.
What are we getting at here? Long story short, nobody’s assets are safe, and this is most likely long-term bullish for crypto currencies. Without further ado, here are the top trending crypto currencies around social media right now.
Bitcoin (BTC) and Ethereum (ETH) are the usual duo making the top of the list. We’ve got some interesting names coming in the 3-6 ranks.
Chainlink (LINK): Currently priced at $14, LINK began gaining in popularity back in April of last year after the crypto mooned from $10 to $50. It is now sitting at a 9-month low along with many other crypto currencies. Is it time to buy the dip?
Tether (USDT): Stablecoin Tether has been gaining in retail sentiment after everything that has been going on with Russian sanctions. Will this enforce USD as the sovereign currency that was potentially losing ground after trillions of dollars were printed? USDT closely tracks the US dollar so an investment in USDT is very similar to purchasing dollars outright. Why would someone purchase USDT versus holding cash? Great question, but it probably has something to do with cryptos not being very regulated at the moment.
Dogecoin (DOGE): This meme-coin continues to make headlines as it drops to another lower low. Will we get a break-out again? You can never count this coin out as it comes with a cult-like following.
Matrix Scans - Heating Up Calls
Heating up calls was seeing some action on Friday with a lot of recently beaten names catching bids on the call side. AMD, BABA, PYPL, MSFT were making the top of the list with call volume trading at 500% the 10-day average for those strikes.
Matrix Scans - Roaring Kitty Calls
Another ETF to keep an eye on is the inner workings of the Russell 2000 (IWM) which is used as a benchmark for measuring small-cap stock performance. Like growth stocks, many of these names are down bad similar to how down bad you were on prom night. Some of the names that stick out seem to be on the short-squeeze list that hasn’t been talked about in a while, such as Beyond Meat (BYND), Clover Health (CLOV), and Overstock (OSTK). Are short-squeeze names going to make a come-back? At this point we need most stocks to rally 1,000% just to get back to last year’s highs.
Matrix Scan - VIXinator Calls
With all the craziness that is happening in the world I thought it would be worthwhile to check out what was going on in the VIXinator calls scan. Are players setting themselves up for the situation in Ukraine to escalate? Either way, any directional bets here could potentially mean more volatility is to come. Whether a hedge or not a directional bet is still a one-sided bet where the player is seeking to protect themselves.
On this scan we’re seeing VIX calls being traded at least several months out at a range of strikes mostly out-of-the money. In my opinion, this could be protection in case things get worse and we continue to see more downside. Nobody really knows what is going to happen, but it’s always good to keep an eye out.
That’s it for today’s edition. Hope everyone had a good weekend and is staying safe out there. PS if you are tired of getting hammered with this market volatility, check out the VIG - Cash Games section where we give out hundreds of dollars on the daily. It’s absolutely free to enter and literally can’t go tits up. Check it out to get in on this risk-free action.