NEWS
The Chase Is Totally On…

The S&P 500 closed above 6,000 for the first time ever, and Bitcoin blasted through $85,000 on its way to the actual moon. If you’re a longer-term investor or trader who feels like everyone is making easy money in this market besides you, we have some thoughts for you in the main story below. 👀

Today's issue covers a few thoughts on FOMO, some crazy crypto market stats, and several noteworthy pops and drops. 📰

Here’s the S&P 500 heatmap. 6 of 11 sectors closed green, with consumer discretionary (+2.02%) leading and real estate (-0.87%) lagging.

And here are the closing prices: 

Most bullish/bearish symbols on Stocktwits at the close: 📈 $MFH, $BTM, $MMV, $CTOR, $LEDS 📉 $NGNE, $ZETA, $BTG, $ASRT, $SE*

*If you’re a business and want to access this data via our API, email us.

STOCKS
There’s Frankly A Lot Of FOMO Out There 😬 

With the bull run continuing across risk assets, many market participants are feeling left behind, succumbing to “FOMO” and pushing prices even higher. During this time, technical analysis can offer a friendly reminder to always think about where an asset has come from and where it has the potential to go. 🤔 

One way to measure this is by looking at a stock’s price relative to its 200-day simple moving average. That technical indicator measures a stock’s long-term trend, where prices eventually tend to revert if they get too stretched from it.

Below is a solid example of this using Palantir Technologies ($PLTR).

The stock recently broke out to new all-time highs via a “breakaway gap” through its 2021 highs, a very bullish sign. However, the stock is now more than 110% above its 200-day moving average, exhibiting how “stretched” it is relative to its longer-term trend. This represents a potentially higher-risk environment for shares, as prices could “mean revert” to their long-term trend. 😮 

This “stretched” condition can resolve itself as a correction, where prices fall to the moving average, or over time, where price growth slows and allows the moving average to catch up. The bulls would prefer the latter outcome, but for now, they’re pushing through any potential downside risk and paying higher and higher prices for the red-hot stock. 🐂 

And it’s not just happening in Palantir. Open your portfolio, and I’m sure you’ve got at least one stock that recently experienced a monster run. And it’s happening on the downside too…take a look at Moderna hitting fresh lows while being 60% below its 200-day moving average.

So, if it’s tough to press bets in extended stocks or assets, what is a trader or investor to do in these assets? The answer may be to wait for a more attractive risk-to-reward opportunity, even if it takes a while to present itself.

A great example of this is Bitcoin following its breakout in late 2021. It rallied over 400% in the year after its breakout, leaving many to believe they’d never be able to get in at lower prices again. So, they chased. Flash forward a little over a year and prices had corrected nearly 80%, bringing them back to the original breakout. 🙃 

Now, that’s not to say that will happen again this time. But the point is that market opportunities present themselves regularly, but usually not in the timeframe we’d like them to. It’s important to remain patient and wait for a risk-to-reward opportunity that aligns with our long-term goals, risk tolerance, and overall investment objectives. Otherwise, emotional trading could lead us down a rough path.

This perspective is important to keep, especially in today’s environment where it feels like you’re missing the boat on the next greatest trade or investment. Maybe you will, but history tells us that the boat will either tend to make another pass…or another, better boat will emerge. You just need to be patient. 🤫 

The recent trading environment can certainly get (and stay) crazier than it already is. But hopefully, this perspective can help investors and traders with longer-term horizons navigate an endless list of “amazing” opportunities right now.

Stay safe out there, folks. Enjoy the ride, and speculate responsibly! 🫡 

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