Nasdaq Gets Pounded
MSTR adds BTC
What a day the equities especially the Nasdaq were pounded on the DeepSeek news. However when we look at the chart, you can see that it is sitting right in the middle of our weekly trend channel, how about that 21VWMA as support!
We talked about the potential for an initial revaluation and its pretty safe to say that we should expect further damage in the future. When something like this comes along at a 90% discount, we must first caution against the validity. Yes at first site the product is solid and has passed a bunch of tests, but how can we be sure that the price tag is what they say it is. We don’t know if this is the truth, but as with everything else, time will tell. With that said its obvious that the question becomes, how much is overspending and overhype? The market place will do its job in discounting this and we know one thing for sure, this will happen over time and volatility will remain. Now we prepare for the tech earnings tomorrow and Thursday.
Ok so let’s go right into the settlements from yesterday:
The bond market was bid on all the volatility and 2 new issues were auctioned off in the 2y and 5y sectors, with the 5y seeing good demand. The equities were pounded with the Nasdaq the big loser down -652.75 points down 3%. Bitcoin was also hit hard -6% closing at 99653 down $-6032 from our closing mark yesterday. Silver was also hit hard -$77.10. So we are seeing a reversal of the majority of trend flows over the last few months.
The Dow is now the 5day winner and Nat Gas clinging to the 30d top spot:
As far as the Magnelibra CTA Markets Sentiment Tracker the 30Y bond is now a +1, the Ten Yr Note moves to Neutral. The negative sentiment in equities has pushed both the SP500 and Nasdaq to Neutral position and the Yen is back +1. As far as the sentiment tracker P+L utilizing a single contract to represent sentiment, it had its worst day of the year so far dropping 14.57%. To note, this is not the intent of this tracker to create a P+L rather it is a sentiment of flows positive, negative or neutral. We added that hypothetical P+L to quantify the entire contract base based off of the sentiment positioning. Using one full contract presents the standard base unit. Days like yesterday show you how powerful some daily moves can be which is why position sizing and risk adjusting in the world of futures and options is paramount:
As far as the MEGA8s the group lost -$848Bn dollars and is now below the 50pMA on the market cap total chart. We don’t have a target hedge this week but would look at the 520C potentially on a move up there, if not, no reason to really chase on large down moves, that is not the intent of proper hedging, that is unless you are forced, and you never want to be a forced hedger. We will change the rankings tomorrow as Nvidia was pounded -17% and is now in 3rd place with Apple regaining the top spot:
We would suspect the 21pMA (pink line) to be a magnet here for the bulls to retest and work off some this overselling. Technically though you can see that the series of lower highs over the last 2 months, not exactly bullish so the risk is for continued selling on the up moves. A break of that dashed red trend line would be needed for bulls to flip this on the longer term time frames.
As far as the MicroStrategy tracker it is down marginally and the volatility covered call selling hasn’t been that lucrative over the last 2 months:
MicroStrategy continue to buy Bitcoin near the $100k marker, pushing up its DCA or dollar cost average price now to $64,529 and their equity premium is 1.87x. Their BTC yield thus far is a paltry 2.54%, certainly no where near where it was. This BTC Yield is the KPI MicroStrategy uses and it represents the percentage change period to period of the ratio between the Company’s bitcoin holdings and its assumed diluted shares outstanding. You won’t hear Saylor touting a 2.54% BTC Yield, that’s for sure:
For those not clear and why we don’t believe this strategy will work out well for them in the long run we have two significant points:
Investors are buying MSTR Equity and only receiving 0.187% of a bitcoin, thus you are paying an extra 1.87x for something you can buy directly on your own and assume the underlying without the equity risk
Bitcoin has historically traded to its 200wk Moving Average, you can see from the chart below that if and when Bitcoin does make it back down there, MicroStrategy’s losses will be in the billions, they will be forced to liquidate some of their holdings as the 200WkMA is at $43,652:
Ok so you can see our premise and what is driving our thesis. Now don’t take this any other way other than a fundamental position against owning something like MicroStrategy stock and owning Bitcoin itself outright. They are two very different things and long time readers know in the long run we believe in the Bitcoin p2p network as a digital decentralized network for the future of business and commerce. There is one fundament belief that we have about Bitcoin and it is that its open source ledger based system should be the standard for accounting for transactions in the future. We know in the future that the block mining rewards will not be the driver of revenue for the miners, but rather block transaction fees themselves will be. So there is a lot to consider moving forward but the overall system is assuredly evolving.
OK that is it for now, we hope you learned something today, we hope you are continuing to refine your process, that you are looking at markets and data in new ways and that you understand it is a continual process of improvement in all facets of life. With that said it is our goal here at Magnelibra Trading & Research to assist this thought process. We believe that by simply reading and listening to our work that your mindset is unconsciously adapting to how we present and view data and that it is sparking new pathways of understanding for our readers and listeners. The world is a dynamic place, each and everyone of us has a direct impact on other around us, remember that, believe that and believe that your ACTIONS do matter even if you think they do not, words and actions matter! Till next time, please give a like, share or subscribe if you can financially do so, we believe MTR is well underpriced for what you are receiving in regards to both content and volume, so please consider it. Our BTC address is also below if you want to remain anonymous (well somewhat, as ChainAnalysis has undoubtedly mapped the ecosystem). Till next time, cheers.
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