SpaceX IPO Grows Oversubscribed With Emotions High

The market rallied strongly on Thursday after President Trump canceled attacks on Iran and reiterated that a deal was close to being reached. By some counts, he has said this nearly 40 times previously. The market has rallied nearly every time he says it but it doesn’t sell off when no deal occurs. The end result is that the indices keep hitting new highs.

Is it different this time? Maybe. The details sound promising, and there is enough optimism to send the S&P 500 up around 1.75%, and the Nasdaq 100 (QQQ) flew up 3.3%. The Russell 2000 was up 3% as well. The Magnificent Seven (MAGS) lagged but went from red to a gain of 1% at the close. Breadth was solid with about 69% of stocks gaining ground. Microsoft (MSFT) and oil were the biggest losers.

The SpaceX Setup

It is an interesting setup as we go into the big event of the SpaceX IPO, which launches on Friday. The deal is heavily oversubscribed, with a big portion going to retail investors, so there will be a lot of emotion. The big question is how that emotion spills over to the broader market. Will a strong SpaceX showing create stronger speculative action in other areas of the market or will it suck up liquidity and attention and cause rotational action?

We will see. Many market pundits believe that a massive IPO is a classic signal of a market top. I doubt it is that simple, and I do not expect an immediate and sustained drop. What is far more likely is some volatile rotational action. 

The biggest danger from SpaceX will come in the next few months when big blocks of stock are unlocked and sold into the market. There will be a lot of stock to digest. 

Strategy

If we see some upside follow-through on Friday, I’ll probably look to do some selling into strength, but I’m not betting on any major downside. Be ready to rumble. Friday will be an interesting day.

Have a good evening. I’ll see you tomorrow.

At the time of publication, DePorre had no positions in any securities mentioned.