The indices are performing well as they dance around to tax news and anticipate a final bill will be approved. Traders are in a good mood as small caps outperform and the crazy action in the blockchain group continues.
Today it is LongFin Corp. (LFIN) that is going nuts in the blockchain sector with a gain of 200%. The company had a lackluster IPO just a few days ago but announced this morning that it has acquired a company that uses cryptocurrencies in microlending.
This is the sort of stuff that happens in bubbles and is very similar to what happened back in 1999 when stocks would go nuts anytime an internet connection was promoted. Stocks like this trade like Ponzi schemes. The buyers are confident that more buyers will come in and that they will be able to escape. Whether the business is legitimate or not is a secondary consideration that doesn’t matter much to those that are watching the price action.
I commented earlier this month that this bitcoin related frenzy is supportive of small cap speculation as it rewards high risk trading. I expect to see that continue into the end of the year. This bitcoin/blockchain hysteria is far from over.
Some of the bitcoin related names that are on my trading radar today included Seven Stars Cloud Group (SSC) , US Global Investors, Inc. (GROW) , Overstock.com Inc. (OSTK) , Metropolitan Bank Holding Corp. (MCB) and MGT Capital Investments Inc. (MGTI) .
I’m seeing some potentially good setups in the small cap group for next week but I want to see the market action after this tax bill is finally passed. I think the risk of a ‘sell the news’ reaction is quite high.