June Swoon To Follow The May Meltup?

What history tells us, the $FFIE meme stock saga, and signs software's slump could end soon.

NEWS
June Swoon To Follow The May Meltup?

It was a pretty quiet session overall, at least until the final thirty minutes of trading when bulls ran rampant to end May on a strong note. Let’s see what else you missed. 👀

Today's issue covers whether stocks are setting up for a June swoon, Faraday Future Intelligent Electric’s “meme stock saga,” and signs that software’s slump could end soon. 📰

Here's today's heat map:

11 of 11 sectors closed green. Energy (+2.49%) led, & technology (+0.16%) lagged. 💚

The Fed’s preferred inflation metric, personal consumption expenditures price index (PCE), rose 0.20% MoM and 2.70% YoY. The core version, which excludes food and energy, rose 0.10% and 2.80% YoY. It’s continued to trade in a range for all of this year, with its stickiness causing the Fed to remain restrictive. 🔻

Personal income matched estimates by rising 0.30% MoM, while spending of 0.20% missed the 0.40% expectation. Adjusted for inflation, spending was down 0.10% as goods spending remains suppressed. 💵

Chicago PMI posted its sixth straight monthly decline, falling to its lowest level since May 2020. The current level of 35.40 is below the level the index was at at the start of six of the seven recessions since its inception. That said, this data remains volatile and should be looked at holistically. 🏭

Boston Beer shares surged 23% on a Wall Street Journal report that it’s in talks to sell itself to Japanese whisky maker Suntory, which owns Jim Beam. 🍻

Moderna shares were down 6% despite the Food and Drug Administration (FDA) approving its RSV vaccine for seniors, marking its second-ever product. Meanwhile, Pfizer shares popped after its drug for advanced lung cancer showed promising long-term trial results. 💉

The energy sector rebounded on news that OPEC+ is working on a complex production cut deal for 2024-2025. The new deal could include extending some or all of the 3.66 million bpd cuts into 2025 and all or some of the voluntary 2.20 million bpd cuts through the rest of 2024. 🛢️

Saudi Arabia is looking to test the waters for international interest with a new $13.10 billion Saudi Aramco sale. That amounts to roughly 0.70% of the state-controlled oil company, reserving 10% of the offering for retail investors. 💸

Other active symbols: $DJT (-5.30%), $SMMT (-20.47%), $MDB (-23.85%), $BNAI (+110.85%), $LPA (-49.78%), & $NVOS (+132.82%). 🔥

Here are the closing prices: 

S&P 500

5,278

+0.80%

Nasdaq

16,735

-0.01%

Russell 2000

2,070

+0.66%

Dow Jones

38,686

+1.51%

TECHNICAL ANALYSIS
What History Suggests For The Rest Of The Year

One of the classic phrases in markets is “sell in May and go away,” which indicates that investors should exit the market before May 1st and enter again on November 1st to avoid “heightened volatility” and lower returns typically seen during this six-month period. 🏖️

However, as with most seasonal methods, the market doesn’t always play…as it’s showing us this year. Instead, a typically volatile month of May ended with the major indexes in the green. But will it continue, or are we due for a June swoon?

For that answer, I turned to stat master Ryan Detrick, Chief Market Strategist at Carson Group, and his latest blog on the subject. 👇

The first takeaway from his research is that when stocks end up 5% or more in May, June has been higher five out of six times, and the median return through the rest of the year is 12.90%. 😮

Another stat that bodes well for the bulls is that stocks historically do well in June during an election year. And not only that, but a summer (June-August) rally is actually quite normal during an election year. 🗳️

On top of those two positive tailwinds, Detrick also pointed out that stocks typically do well during the 4th year of a new president who’s up for reelection. We’ll let you draw your own conclusions regarding why that might be, but nonetheless, it’s yet another positive for the broader market. 😉

Overall, there remain plenty of things to worry about, ranging from sticky inflation and interest rates to geopolitical risk and the AI hype cycle. But if history is a guide, things should continue to look on the bright side despite the tall “wall of worry” in front of us.

You can read the rest of Ryan’s blog post here. He’s one of my favorite strategists and a really nice guy to boot. 👍

MEME STOCKS
What The $FFIE Is Happening Here?

Traditional meme stocks roared back to life on May 13th when the infamous “Roaring Kitty” returned to his perch and reignited the “meme stock” saga of years past.

However, another stock that came back to life during all this was Faraday Future Intelligent Electric ($FFIE), a struggling luxury electric vehicle maker that recaptured the attention of retail traders at a wicked speed. 🫨

The U.S. electric vehicle startup has existed since 2014 but came public via a special purpose acquisition vehicle (SPAC) during the height of the pandemic, completing its merger on July 21, 2021.

The offering resulted in about $1 billion in gross proceeds for the company, which promised: "…industry-leading technology, unrivaled new products, and a world-class experienced team to drive the success of FF for years to come.”

But much like other pandemic-era darlings and its peers in the EV startup space, it faced many hurdles in delivering on its promises. Instead, it relied on financial engineering more than anything to keep itself going. 💸

If you need evidence of this, just check out its stock split history. Its first reverse split was 1:80 in August 2023, and its second was 1:3 in March 2024. And still, its stock price today struggles to stay above $1.

Nonetheless, when a heavily shorted “meme stock” gets going, it can have some massive moves. That’s why the Stocktwits community flagged its improving momentum and price action the week before Roaring Kitty returned. Sentiment rose into “extremely bullish” territory on March 13th as prices rallied 32%, showing traders betting big on further gains. 👀

That catalyst immediately put the stock back on momentum traders’ radars, helping it rally nearly 10,000% from its lows in the following two weeks.

Here are some wild stats from the $FFIE Stocktwits stream during the frenzy.

  • Symbol page views for May were more than 2x higher than the entire previous year (05/01/23 - 04/30/24) and 10x higher than the first four months of 2024.

  • Message activity surged in May, up 1.7x from the entire previous year and roughly 15x higher than the first four months of 2024.

  • The number of people with $FFIE on their watchlist more than doubled in May to 25,500, putting it in the top ~350ish most-followed.

Stocktwits user @DougieFreshPicks was one of several who played the move and was able to catch onto the trend early.

I chatted with him briefly to learn about his journey with the stock. He primarily trades stocks that move with volume and have a good technical setup, so $FFIE was right up his alley.

Like other stocktwits users, he identified the improving momentum (using MACD and RSI) and was able to ride the stock for a 2,000% gain, even holding some for an 8,000% gain in ten days. He’s no longer involved in it, moving “onto greener pastures,” as some might say lol. 😅

Because as we typically see with meme stocks, its earnings report brought it back to reality this week. 🙃

The electric vehicle maker’s core business remains in shambles, with revenues of just $784,000 and a net loss of $431.70 million during 2023.

As of the period's end, its cash balance was just $4 million, prompting management to issue a “going concern” warning. In English, that means it risks filing for bankruptcy if it can’t raise more capital. ⚠️

But even if it can, investors remain concerned that the market for its electric vehicle remains soft (or nonexistent) given its starting price of $309,000. It’s delivered just 11 vehicles year-to-date and pulled its 2024 production guidance after lowering it to 1,000 last November. 🪫

Overall, this is another classic meme stock case because it features a core business that’s not working, and the stock price’s main mechanism for rising is market mechanics, not business fundamentals.

While there is a core group of investors who believe in the company’s long-term vision, most are simply along for the ride if/when its stock price begins to squeeze again. And when the momentum sours, they look elsewhere.

It’s a wild story nonetheless, and one that many are clearly watching. 🍿

And if you are thinking, “Man, I was completely out of the loop on this one.” Don’t worry; we’ve got you covered. 👇

We’re working on a new newsletter focused on the “degenerate” parts of the markets and economy, as well as the culture surrounding them. It’ll cover everything from meme stocks to yolo plays to the latest crypto crapshoot.

Email me [email protected] to let me know you’re interested and/or share your thoughts on topics we should cover. 🤪

STOCKTWITS “CHART ART”
Volume Surge Suggests Software’s Slide Could See Its End 📊

One of the most closely watched sectors this week has been software, with many analysts pointing to its weakness as a warning sign for the tech sector. ⚠️

With prices falling further over the last few days, Stocktwits user @gpaisa highlighted volume surging to its highest level since the first quarter of 2023. He notes that’s when prices bottomed and began their upward trend.

He’s betting that this is capitulation-level volume and that the sector could bottom as early as next week. 🐣

If you like this chart and commentary, you’ll love our “Chart Art” newsletter. We’ll deliver you the best trade ideas and analysis from the Stocktwits community every evening by 8 pm ET.

And if you need another reason to join, you’ll receive a welcome email with a list of the top Stocktwits chartists to follow for real-time posts like this.

Bullets From The Day

🤑 Bill Ackman prepares to sell stake in Pershing Square at $10.50 billion valuation. The famous hedge fund manager is raising $1.05 billion in a funding round worth 10% of his management company, Pershing Square. It’s an initial step in a longer-term plan to go public in the U.S., though he hasn’t hired bankers to officially start the process yet. CNBC has more.

🕵️ European Union cracks down on Temu. The popular e-commerce site has been designated a “Very Large Online Platform” (VLOP) under the Digital Services Act (DSA). Temu has more than 45 million monthly users in the European Union, meeting the threshold and forcing it to comply with the strictest DSA rules. More from The Verge.

Hackers steal $305 million from DMM Bitcoin crypto exchange. The Japanese crypto exchange confirmed on Friday that it had been the victim of a hack stealing 4,502.90 Bitcoin. It detected “an unauthorized leak of Bitcoin (BTC) from its wallet” on Friday and is still investigating while taking steps to prevent further thefts. It’s the latest security issue in the crypto space, with analysts estimating that hackers stole around $2 billion in crypto just last year alone. TechCrunch has more.

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