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GoldFix Daily: RobinHood & Co Just Robbed You

Welcome. GoldFix is original content. The goal is to give you, the reader, some basis for looking at markets as you prepare your own trading day. Second, it aims to give you more tools, or at least the basis for developing your own tools to navigate markets. To that end we expect there will be changes based on feedback. Gold is the jumping off point for analysis.

GoldFix Daily Brief
Good Morning. The DX is down 10. Bonds are firmer. Stocks are slightly higher. Metals are mixed. Crypto is much lower.
Robbing The Hood
RobinHood stock ran much higher in a squeeze likely driven by a convergence of forces including options, well placed comments, and in our view manipulation. Yesterday we ran a graphic showing the increased interest in the stock on the popular platform Reddit. Bloomberg said this morning:
Wall Street was mesmerized by the latest explosion of interest in meme-stock trading that sent shares in Robinhood Markets Inc. surging 100% this week, just days after flopping in its public trading debut. Theories abound for the sudden rally, including options trading, Cathie Wood’s endorsement and Jim Cramer’s tweets.
What is not obvious to the public but is to experienced observers is that something is rotten here. While a quid-pro-quo cannot be proven, while factual evidence is not readily available; the burden of inductive thinking tells us that this is bad. Sadly it also tells us nothing will be done; at least not until all the money is taken and all the tracks are covered.
There is plenty to read about it if one looks. Our contribution to the situation is a bit of historical perspective. The unspoken law on Wall street in IPOs is this:
  1. A company should price its IPO too cheaply to ensure demand. This will attract buyers, and consequently “paint the tape” as a stock that goes up.
  2. Further, IPOs should be a small portion of the float because this is not a cashing out by owners. It is, however, a table-setting for future cash out.
By issuing a small float in an IPO and enjoying the positive press coverage of a stock going up in the press, the company markets itself and creates demand for the secondary offering which usually comes in a year. The secondary offering will now have more demand since the buyers of the IPO made money. This is where the game changes.
The secondary offering is usually a much bigger portion of the company. And it is also frequently priced too high relative to its true valuation. The secondary deal is a “cash out” for owners and does not usually do as well initially.
This is so entrenched in Investment banking that the joke used to be: Go public with Alex Brown, home of the “up” deal. Short any Alex Brown IPO that runs its secondary offering through a bigger bank like Lehman or Citi. Those go down.
VBL
@zerohedge IPOs are meant to price a small float and cause demand to be an "up deal". this sets the secondary offering up to be bigger since th initial skepticism is over. To have a down ipo is a disaster for their Banker.... OH WAIT....
RobinHood took itself public. The stock did not do well in IPO which was very strange. But 5 days later post social media interest (modern bucketshops), big public comments by Cramer and Cathie Wood, and large options purchases; the stock took off yesterday. Looks fishy sure, but maybe its just a company that had one of those delayed IPO price pops.
Highly unlikely as RobinHood insiders announced what is going to be essentially a secondary offering of their stock 6 days after the IPO. This takes advantage of the pop a mere 5 days after the IPO.
Zerohedge saw the problem right away:
One day after Robinhood shares exploded 50% higher as the start of options trading allowed a furious gamma squeeze to pin shares at $70, and with HOOD stock more than doubling in the past few days after a dismal IPO, this morning Robinhood shares tumbled as much as 12% in premarket trading Thursday after shareholders filed to sell 97.88 million shares less than a week after its initial public offering.
None of the proceeds will be received by the company, with the selling stockholders getting all of the funds from the sales, according to a filing with the U.S. Securities and Exchange Commission.
The popular Finance blog goes on to say: The move comes just a day after a flood of retail traders joined larger investors, such as Cathie Wood’s flagship ARK Innovation exchange-traded fund, in buying the stock.
Remarkably, one month ago we noted that in a change from usual lockup procedures, HOOD insiders would be allowed to sell up to 15% of their holdings as soon as the first day of trading, which many of them did resulting in the dismal first day performance post IPO. And now, thanks to the bizarre surge higher, the temptation proved just too much, and insiders plan on continuing their dump from the vastly overvalued stock.- Source
What will be done? Nothing meaningful. Why? Because we are a nation of laws and you will have a hard time proving one is broken. Ethics and protecting the public interest are a different story.
The Public is not happy
The Public is not happy
On Deck: The Bank of England is expected to keep its benchmark interest rate and bond-buying target unchanged when it issues its latest policy decision at 7 a.m. ET. U.S. initial jobless claims are due at 8:30 a.m., with economists expecting a second consecutive weekly decline. Trade balance figures for June arrive at the same time. In earnings, we get Moderna Inc., Duke Energy Corp. and Cigna Corp. among many others. The Group of 20 digital economy ministers meet in Trieste, Italy.-Source
Gold Technicals
The following are excerpts from Moor Analytics Technical Reports posted here with permission and not actionable out of full report context.
Upside: If we break above $1,823.2 and back below, look for pressure. Sell against $1,835.0. If we break above $1,837.5 and back below,
Downside: Get short on a decent penetration and/or pullback below $1,812.7 (+1 tic per/hour starting at 8:20am) and look for decent pressure (a moderate suggestion).
Oil Technicals
Special Lecture: Pay For Orderflow Explained
Given the recent attention to RobinHood’s IPO and their questionable business model, we gave a full on explanation of how Pay for Orderflow works. The 2 hour lecture is a deep dive into the definition, practices, and real life experience in this practice from a 30 year veteran who lived it. The University quality lecture covers the evolution from the late 1990’s to today’s use. GoldFix subscribers can access it for a limited time using Access Passcode: 3Dyb$+=+
VBL
Pay for Order Flow Lecture Recording from Sunday
https://t.co/DEVTmFFJZN
That’s it, Good Luck
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VBL

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