Rarely has a small company dominated the news the way GameStop did last week. As fiercely as two groups of market participants warred, the broader market managed to remain unimpressed by what was happening. The big question was why the management of GameStop and 50 other embattled companies did not take advantage of these price jumps to get some much-needed liquidity out of the market in order to save their companies. Several questions arise here, which the Securities and Exchange Commission and other authorities will have to deal with. Many hope that the lessons learned from these events will leave their mark on all participants:
On one hand, hedge funds have learned that the risks taken do not always pay off after all, and new dangerous counterparts will make their lives more difficult. The hedge fund Melvin Capital lost 53% of its assets in January, forcing investors and shareholders to provide the fund with liquidity. For many Robinhood speculators, even playing this game fairly, it was all or nothing. Robinhood and the other brokers summarily banned trading in the speculative stocks, and the small investors watched their astronomical profits melt away, or their speculation become a disaster.
In the meantime, Reddit activists discovered silver as a short-squeeze opportunity. Even though the data and all the statistics support that silver is the most shorted commodity in the world and the companies in this industry segment have become the favorite object of hedge funds, some activists had not done their homework thoroughly enough in the heat of the moment. They rushed blindly into the silver ETF – SLV, which is owned by these hedge funds. Thus, they played into the hands of their opponents. The calls to rather buy physical silver came belatedly. As a result, silver price reached a small record high in the short term, giving profiting the big players. Many observers doubt that it will be as easy with silver as with a single stock. Because the metal market is much bigger and more complex.
Things were not less spectacular in the U.S. politics. The Democrats were just able to get their $1.9 trillion stimulus through the House of Representatives with the Vice President’s vote. In the short term, at any rate, the passage of the aid package easily drowned out the bad news from the labor market. Unemployment numbers decreased less than expected. Some claim that they have rather increased, however as many individuals give up looking for work, so they are no longer officially recorded.
The markets reacted to the mostly positive news with increased prices. The light at the end of the tunnel got a little brighter and we identify continuous panic buying. The S&P500 gained 4.17% for the week. Gold ended the week down by 2.98%. The oil price rose massively in response to OPEC’s announcement that it would not expand production volumes, gaining 9.35%. US T-bonds rose 8.3%, which can also be interpreted as an increase in investors’ risk appetite. ONE SIGNAL delivered long signals for the entire week and got the market movement right every day. Smart traders made a profit of 2.95% last week. This brings ONE SIGNAL’s year-to-date gain to 6.93%.
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We wish everyone a great start to the week.