WC-03/17: Expect A Strange Week + Note on TikTok Ban
Margin debt is back down. Doing my own analysis now.
A strange week ahead? I knew it!
Margin Debt
Before I get into indicators, here’s yearly change in margin debt (across all US-based accounts), calculated by yours truly in python from Finra data, since Yardeni doesn’t make their reports easily accessible anymore.
As you can see, we’re heading downward slightly after that big rebound from the collapse that began in 2021.
Let this chart settle in. It looks like we have a little downward behavior ahead, but it’s hard to say exactly what that looks like.
Indicators
Last week I mentioned that the anticipated “better” week ahead seemed “too good to be true” and to expect some turbulence. Here’s the exact quote below.
“Indicators are pointing to a good week. It almost seems too good to be true, so maybe expect some turbulence.”
As we saw, that week was all over the place.
Now the McClellan Oscillator is at -12.67 and changed direction.
The variety of oscillations over the past year make this even more confusing.
I’m working on analyzing data on this as we speak.
RSI was at 56.32 EOD Friday and finally dropped from the Upper Limit it was teetering around, where it’s considered oversold.
Last week I said, “It has to drop soon, and when it does, the market will rally with intensity.”. Well… for better or for worse, that didn’t happen.
Catalysts: Don’t pay attention to Tik Tok
$META won't jump after this Tik Tok "ban". The demographics of Instagram are similar enough but, if I had to guess, most Tik Tok users have Instagram already.
Moreover, Instagram has twice the monthly active users, so TikTok wouldn’t really bring any new business if Meta were to buy it.
As of June 2023,
Almost 42,000 influencers and creators in the U.S. had between 50,000-100,000 followers, identifying them as mid-size creators.
Approximately 35,500 influencers had between 100,000-250,000 followers
Less than 10,000 U.S. creators on the platform had over one million followers as of June 2023.1
I’m sure there’s more now, but it’s not worth looking up.
The “ban” is a forced divestiture, but everyone is mixed on it.
I’ve never seen anything like this before; Trump and Ilhan Omar agree on something, and that is to sign the “ban” on Tik Tok. Omar voted against it last week.2
Unsurprisingly, Trump switched his stance against the bill after meeting with Republican mega-donor, Jeff Yass, in Mar-a-lago, along with The Club For Growth, a conservative Think Tank headed by Yass. After the meeting he wrote on Truth Social: “If you get rid of TikTok, Facebook and Zuckerschmuck will double their business. I don’t want Facebook, who cheated in the last Election, doing better.” Per The Guardian, it was reported that the former Trump White House aide Kellyanne Conway had in recent months been lobbying for TikTok in Congress on behalf of the The Club For Growth.3
The whole thing is a mess, and
De jure, this is just a divestiture
China (Chinese companies) can’t own Tik Tok’s U.S. operation. However, the bill calls for the president to make this distinction on how much they need to divest.
It would become a de facto ban if the president forces them to divest entirely, however I haven’t seen any verbiage in the bill which states that, or any words from the president indicating that will be the case.
It passed the House almost two weeks ago with, what I would call, an overwhelming majority of 40 total yeas (32 Republican and 18 Democrat) to 9 total nays.
For what it’s worth, I think META 0.00%↑’s mean-reversion behavior is too strong for tiny jumps to matter. Just my opinion.
https://www.statista.com/statistics/1398218/tiktok-us-influencers-by-followers/
https://www.fox9.com/news/tiktok-ban-how-minnesotas-congressional-leaders-voted
https://www.theguardian.com/technology/2024/mar/11/donald-trump-tiktok-ban-biden