{"id":18752,"date":"2021-07-29T07:30:14","date_gmt":"2021-07-29T11:30:14","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=18752"},"modified":"2021-07-29T07:30:14","modified_gmt":"2021-07-29T11:30:14","slug":"the-bells-are-ringing","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/the-bells-are-ringing\/","title":{"rendered":"The Bells Are Ringing"},"content":{"rendered":"

There’s an old saying on Wall Street, “Nobody rings a bell at the top of the market.”<\/p>\n

This means, of course, that there’s nothing obvious that tells investors when it’s time to get out.<\/p>\n

But I wonder… is it that nobody is ringing a bell? Or is it that the bells are ringing but – like children on a playground – investors are having too much fun to hear them?<\/p>\n

After all, in hindsight, we can often point to an obvious event that marked at least a short-term top in an asset class or a stock.<\/p>\n

<\/p>\n

For example, think about the wild and crazy action in the cryptocurrency market a few months ago. The price of bitcoin surged from $10,000 per coin in October to over $60,000 by April. Ethereum rallied from $250 to over $4,000. And, the joke-inspired crypto, Dogecoin, ran from less than one penny to trade as high as $0.74.<\/p>\n

Today, the entire cryptocurrency market has been just about cut in half. Bitcoin trades just over $39,000. Ethereum changes hands for about $2,300. Dogecoin is $0.20. And folks who chased cryptos higher during that final rush in April and May are stuck wondering “What happened?”<\/p>\n

In hindsight, a short-term top was obvious…<\/p>\n

Elon Musk’s appearance on Saturday Night Live was the clanging bell telling investors it was time to get out. For weeks, before Mr. Musk’s late-night debut, traders assumed he’d be touting bitcoin and Dogecoin. Buyers rushed to get in position ahead of the “pump.”<\/p>\n

That early May episode of SNL received the highest ratings for the show in more than a decade. Mr. Musk was never more popular. And, folks who had never ventured outside of a bank account were throwing their hard-earned money at every crypto-asset imaginable.<\/p>\n

Like I said… in hindsight, it was obvious.<\/p>\n

It’s just as “obvious” when looking at individual stocks.<\/p>\n

Consider the action in Virgin Galactic Holdings (SPCE)<\/a> over the past several weeks. SPCE bottomed in May near $17 per share. Then the company announced it would be flying its founder, Richard Branson, into space in early July – ahead of Jeff Bezos’ scheduled trip. The stock rallied. And, on the day before Mr. Branson’s flight, SPCE closed near $56 per share.<\/p>\n

Today, less than one month later, SPCE trades for about $30 per share. The company’s flight into space was a major “hype” event that signaled at least a short-term top in the stock. It may not have been obvious beforehand. But, looking back on it now, the bell was ringing… and, nobody was listening.<\/p>\n

And that brings me to the point of today’s essay… there’s an event happening today that could quite possibly prove to be the clanging bell signaling at least a short-term top of the broad stock market. <\/p>\n

Let me explain…<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

There has been a lot of speculative activity in the financial markets this year. We’ve seen it in the wild action in cryptocurrencies.<\/p>\n

We’ve seen it in the explosive moves in the so-called “meme” stocks (GameStop, AMC, Bed Bath and Beyond, etc.), and we’ve seen it in the general financial message boards such as WallStreetBets, and Reddit.<\/p>\n

Much of this speculative activity has come from younger investors, stepping into the market for the first time. As a group, these folks have coordinated their activity to such a degree as to become a powerful force – capable of pushing nearly bankrupt companies hundreds of percent higher in a matter of days.<\/p>\n

And many of them, if not most of them, trade through Robinhood.<\/p>\n

Robinhood is an online brokerage firm known for enabling commission-free trades through its mobile app. It has experienced remarkable growth over the past year – since the start of the COVID-19 lockdowns last March – as younger folks took their government stimulus checks and ventured into the world of online stock trading.<\/p>\n

According to Robinhood’s published reports, the company had 7.2 million accounts in March of 2020. By March of 2021, that number exploded to 18 million. Assets under management grew from $19.2 billion last March to over $80 billion this March.<\/p>\n

Robinhood is taking advantage of this growth, and the hype behind the growth, to take itself public in an IPO (Initial Public Offering) which will start trading today.<\/p>\n

Clang… clang… clang…<\/em><\/p>\n

We won’t know until after the fact, of course.<\/p>\n

But, I can’t imagine a more poetic “ringing bell” at the top of the market than the IPO of the brokerage firm that enabled novice investors to trade cryptocurrencies, stocks, and stock options at a time when stock valuations were near the highest they’ve ever been.<\/p>\n

What I do know is that the stock market usually experiences at least one (and usually two) corrections of 10% or more each year. We haven’t had one of those yet this year. Robinhood’s IPO sure seems like it could be the ringing bell.<\/p>\n

Best regards and good trading,<\/p>\n

\"signature\"<\/p>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Are you prepared for a correction happening soon? Or do you think the market will continue to keep climbing higher?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

We\u2019re due for this very soon…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-18752","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/18752","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=18752"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/18752\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=18752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=18752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=18752"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=18752"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=18752"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=18752"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=18752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}