Consider this a public service announcement…
Every day, I see new traders fall for the BS out there on X/Twitter.
Or in scammy Discord chat rooms.
One of the worst pieces of advice the meme stock morons and crypto bros give is…
“HODL! — (Hold on for dear life!) — Eventually it WILL come back.”
That’s just stupid. Plain and simple.
No stock or company or crypto EVER has to come back.
And you can’t predict how far any stock, or the overall markets, can drop.
Especially when you see this…
Classic Profit Taking After a Huge Runup
The overall market ended ugly last week. And it wasn’t just the U.S. markets.
The South Korean market got wrecked overnight on Friday.
Source: Stocks To Trade
KOSPI, South Korean Composite Index, 6/25-26/26.
It got halted for the second time in a week after dropping more than 8%.
Why does this matter for U.S. markets?
Because traders and investors are worried about chip stocks and a bust of the AI boom.
OpenAI’s reported IPO delay didn’t help.
After the Big Tech runup the last few weeks, this looks like classic profit-taking.
Why I’m Being Overly Safe
Look at last week’s SPDR S&P 500 ETF chart…
Source: Stocks To Trade
SPY 5-day, 5-min, 6/23-26/26, no bounce.
The overall market dropped a lot with no real bounce.
At the same time, we’re still VERY overextended and heading into summer.
Here’s the SPY 1-year chart…
Source: Stocks To Trade
SPY, 1-yr, daily candle, 200 MA, still overextended.
It wouldn’t surprise me to see more downside.
And if that happens, all the recent dip buyers might panic (it could get UGLY).
Maybe I’m being overly safe, but that’s how I think.
With the momentum draining out of the highly inflated South Korean market, it could kill tech stocks worldwide.
The key lesson is…
HODLing is an act of naive idiocy.
Remember to cut losses quickly.
Too many newbies mistakenly believe that HODLing is necessary to make big money.
The reality is…
HODLing is a way to LOSE big money.
Prepare for a Pullback
Be aware of what’s happening in the overall markets.
But also be aware of markets in other parts of the world.
Especially the Asian markets right now, because so much tech manufacturing is based there.
We are due for a pullback. It would be good for the markets.
But you have NO IDEA how far it could drop if a selloff turns into panic.
Stay safe.
If you have any questions, email me at [email protected].
Cheers,
Tim SykesEditor, Tim Sykes Daily
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