bowtrix

Market rally = buy highest risk assets

Long
SP:SPX   S&P 500 Index
Hello friends.

Our last idea from earlier was "canceled" when we saw that the insider buying had eased off and the selling had ramped up the very next day. We closed the position at a small loss. Not shockingly, this change in insider sentiment led to yet another crash for risk assets. Now that risk assets have moved lower, insider selling has gone down and insider buying is stable.

We think that the bottom for the stock market is extremely close. An exact level to expect is $3700 on the SPX , but it can be a bit above or below this level so we will layer in some bids. Our plan is to sell off most of our dollar reserves for risk assets which we will hold for almost the rest of the year. Since this could be a really aggressive pump due to the amount of short positions, it might be strong to buy highly risky assets. There's the potential that there could be big returns for buying shitcoins like Dogecoin or even meme stocks like GameStop since these often outperform the market during rallies.

We can illustrate this idea with the pump that occurred 3 months ago for the SPX .

The previous rally of only 19% for the SPX resulted in:

43% rally for Bitcoin
51% rally for Tesla
51% rally for ARKK
59% rally for GME
82% rally for Dogecoin
130% rally for Ethereum
132% rally for AMC
584% rally for BBBY

The worse the asset is, the better the performance should tend to be during a market recovery, especially following a massive downturn like the one we had in crypto land as well as in memestonk land. If the asset has been beaten down dramatically like BBBY , and it starts to get a narrative going such as a "token burn" or a "short squeeze", you need to be paying attention. That kind of activity is what can lead to extreme outperformance for a short period of time during a market uptick.

So, where is the story currently for a deeply shitty asset that has been crushed beneath the feet of the market and has a potentially strong retail narrative for outperformance?

We are looking at the LUNA 2.0 token which has a pretty good retail community and is definitely a low-quality asset that hasn't gotten much growth. Do Kwon is now on the run from authorities, which means there is some downside risk if he is brought to justice. We think the risk is mainly priced in though. If the market starts rising, you could see a "short squeeze" narrative emerge for LUNA 2.0 in the same way a "token burn" narrative emerged for LUNA 1.0.

We are also looking at the Tornado Cash token, which has been totally obliterated by the market and is now down 92% from the yearly highs. It doesn't take much to double or even triple the price of a token like that. There is a strong narrative emerging around Tornado Cash where people will argue that the US government had no right to ban the token's protocol. Traders need to price in the potential for extreme upside if the Tornado Cash protocol becomes unbanned, which is what makes this shitcoin such a story for a rising market.

Beyond Meat could be a name that pops off massively during this rally, in part since it has fallen 93% from the 2019 highs. On top of that, we think the narrative around the COO biting someone's nose and being arrested could ignite a lot of memes which could fuel some strong upside for the stock, even though the stock is profitless and will likely stay that way. A lot of people have joked about how the fake meat will make you go crazy and that this is what made him crave the real meat of a human nose. Of course that is silly, but silliness and memes can drive returns in this clown market.

Dogecoin is one we have to mention because there is a potential catalyst in the form of Elon Musk being forced against his (current) will by law to purchase Twitter stock for the price he agreed to pay. We think that Doge would likely garner a lot of retail attention and have a massive pump in a case where Musk buys Twitter and that it does not really have much downside even if he doesn't buy it since that is a non-event. Musk fans mainly already expect that he won't buy it at all, and the overlap between Doge traders and Musk fans is such that a Twitter buyout could shock the community.

We will buy some of each of these garbage assets, with the expectation that this rising market could lift them by a lot by bringing out speculators hiding in cash. If even one of the big "upside events" such as Tornado Cash being unbanned in the USA, or Doge cult leader Elon Musk buying Twitter occurs, the entire trade could benefit greatly. The downside risk here is mainly that I am wrong and the market is going to continue to crash. If that's the case, we may end up taking a loss on this trade and closing it out.

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