All time highs and blue skies.

Hey everyone, it’s time for my weekly forecast. Last week’s one went pretty well, we can briefly recap (last week’s forecast can be found at https://nopeitslily.substack.com/p/the-market-is-dead-long-live-the).

Bitcoin

Our least favorite tulip bubble recovered predictably, aided by surviving the Great 2021 Stonk Market Crash (where our favorite bubble in the Qs fell a grand 10% from all time highs). As of right now, Bitcoin is slightly off the new all-time high of $61,000:

I’m going to reiterate my call last week. Bitcoin has become positively enmeshed in the larger market euphoria, and although it may present some early warning again, it’s likely a coincident indicator to the equity market at this point rather than our favorite harbinger of doom.

I still don’t see us at the top of this rollercoaster of memery, but I also wouldn’t really buy it here, either. Who knows. Find another newsletter if you want good Bitcoin takes to be honest.

SPACs

The SPACs have started to recover. Nature is healing. My personal favorite barometer of bullshit is the one and only Lucid Motors:

Key word here is started to recover. Clever readers or those sobbing over their memefolios will note that unlike the rally of the Boomer Jones, for the most part SPACs have not yet recovered the highs of yesteryear (February 2021), and to be quite honest at this juncture a light breeze could send them reeling again. However, the chicken bones here look pretty good. We’re seeing a new round of the Meme Regime, and some positive Starlink news or another shirtless pic from Chamath or Bill Spacman might send them stratospheric again. I still have faith in the Meme Regime. I’m echoing my call to average down on the good ones, especially those around NAV. A lot of blank check companies fell back to reality around NAV, and they in this author’s irreverent opinion represent a great risk:reward bet in the current market. Due to the growth of my Twitter and Substack base I’m going to stop recommending individual tickers, unfortunately.

GME

Last week was a fantastic week for GME. As I correctly deduced last Sunday, the settling around $100-140 was a temporary pitstop rather than a ceiling for our ersatz hero. I mentioned specifically I did not see a gamma squeeze, but this *possibly* changed on Monday with the news that Ryan Cohen was still breathing (rather, he was added to some committee by the company). There’s grumblings in the Redditsphere that this will be a week to watch on GME, ostensibly because of the monthly expiration (3/19) of option contracts, coupled with next week’s earnings (3/23). That said, who actually cares what GME made last quarter? It’s a game stock, not a Gamestop.

Last Wednesday was a fascinating chart:

Ostensibly, Gamestop headed to the stratosphere powered by retail hopium, and was callously torn down by the evil hedge funds. Or, to those of us paying attention, the reality was that - unlike the first round where hedge funds and high frequency trading firms were playing in the volatile waters of Gamestop - the order book was as thin as tissue paper. For this round of the meme stocks, it truly is a retail paradise — most of the momentum on the thin order book is from small lot sizes, evidence of a true retail mania. Unlike January where I compared the meme feast to David (retail) standing behind Other Goliath (HFs/HFTs) against Goliath (long/short hedge funds), this round seems truly just a squeeze brought by the little guy. Unfortunately, this means the order book can easily be eviscerated by a large short or put order, leading to the nice 50% drop intraday we observed.

More interestingly, GME’s continued rally fed its meme basket, at first leaking to the whole short seller pain complex (represented by $RKT, $SKT, $TR, among others) but eventually shrinking to just the original basket (AMC, BB, NAKD, KOSS, etc.). This was especially interesting on Wednesday, when we observed that GME was halted 6 times in around 30 minutes. During these halts, price discovery on the plucky volatile meme stock seemed to occur through action on AMC, allowing me to predict a triumphant second act for the Gamestock.

This week will be one to watch, and I still think there’s life in this weird slice of stock market history. I think we’re getting close to the top, as evidenced by the significant pressure since Wednesday to keep the stock around $250. That said, I’m a bit perturbed to see the SPY-GME anticorrelation break down. After Wednesday’s theatrics, SPY and GME have started to correlate, which might mean a cooling off of meme sentiment (or more likely, looking at two days, means nothing). Additionally, my concern is blunted by the fact that SPY straight rallied on both Thursday and Friday. Will be more concerning to see GME also fall on a red day. Fingers crossed.

TSLA and the ARKK

Despite the weird bearish calls of Fintwit, the god meme Tesla seems to live to fight another day. As I noted last week, even during its heralded dip to the mid-500s, Tesla call delta steadily increased, indicating likely bullish sentiment from retail traders looking to pound calls with their promised stimulus (or something, I don’t know, I’m not a psychologist).

Tesla simply exploded up around 20% during last week, finishing its performance by kissing the 700s again on Friday. This of course reverberated throughout the Tesla meme basket. That said, be cautious here. The liquidity problems of ARKK aren’t gone, but they’ll live to fight as long as the call delta keeps flowing and the redemptions don’t. I would keep an eye here and play cautiously on ARKK names, with long gamma of course being the favored game here (if you can even get filled on some of those chains).

Weed

Time is a flat circle! Or so they say. They meaning me. I noted early last week that, assuming the market survives our great February crash, I was bullish on clean energy (via the Tesla meme complex) and marijuana in particular (due to legalization under the Biden regime). Tilray, the Daphne Bridgerton of garbage meme stocks, went parabolic on Thursday, leading the whole marijuana complex higher. This was fed by some lovely gamma, but of course ex post facto it was due to some legalization news or something. News doesn’t actually matter unless it does, I think.

Essentially, TLRY and MJ similar to GME did not decay even during the precipitous drop below their January pre-meme prices. This, under the Merton risk model (assuming the true value of the company is zero, and the equity price is basically a call option) implied to me room for a second life, and made buying marijuana in the throes of the early March depression a no-brainer.

That said, Tilray still seemed on Friday to realize some sensitivity to the ongoing bond yields situation. It opened quite a bit lower on Friday morning, but got renewed vigor mid-day when Kamala Harris sneezed out some legalization news I think. Anyway, keep an eye on the weed memes. I currently have 2 LEAP contracts on $MJ. I’m still in.

The NOPE

As many of you probably observed, NOPE decided to celebrate Friday by slamming the +100 range on close. While this was likely due to OPEX effects (we pinned at 394), I’m well aware of three facts:

1) Every single time NOPE has an end of day anomaly I immediately discount it as “well this time it won’t work”.

2) We had a similar magnitude anomaly last Friday.

3) The last time this occurred similarly was 2/8/21 and 2/12/21.

So, I mean. We might crash or might not. Who knows. Definitely not me. That said, I’m cautious and paying attention. On average this is correlated to worse 14 and 30 day returns, but it’s hard to tell for sure what to do except in retrospect. In general my understanding/best practice here is not to bet on corrections but to play it safe with longs and wait for the window to pass. From what I can recall, the last time something similar occurred where this did not end up in a mini-correction was in mid-November.

Final Thoughts

I’ll be succinct this time in listing my prognostications for the coming week:

• GME will likely continue to rally, but likely hit a snag around 3/19. Historically dates and GME are enemies.

• This should positively impact stocks in its closest meme basket (AMC, NAKD, BB, etc.)

• Weed is likely still in play, uranium may be in play soon (although no signs as of yet of true gamma hijinks).

• If GME continues, the short pain trade may be a good one to continue.

• Mild recommendation of short delta (said very reluctantly due to NOPE). Hunch is this will be a good week to be long theta, but within very tight risk margins.

That’s all for today.

- Lily