19 BILLION Shares Short as Nasdaq Cracks | VIX Breaking Out

Rebels Edge Weekly Summary – February 15, 2024

Key Concepts:

• Foreshadowing: A literary/cinematic device hinting at future events. Used in context of prediction markets.
• Contango: A situation in futures markets where future prices are higher than spot prices. (Not fully explained, but mentioned).
• VIX (Volatility Index): Measures market expectations of near-term volatility conveyed by S&P 500 index option prices.
• Short Interest: The percentage of a stock’s float that has been sold short by investors.
• Short Squeeze: A rapid increase in the price of a stock that occurs when a large number of short sellers are forced to cover their positions.
• UOA (Unusual Options Activity): Significant and potentially market-moving options trading patterns.
• Short Intensity: A metric measuring the level of short interest in a stock relative to its trading volume.

I. Market Overview & Initial Sell-Off

The broadcast began with a discussion of market performance, noting an initial strong start to the day that quickly reversed, resulting in a roughly 350-point drop for both the Dow and NASDAQ. The focus shifted to a sell-off in software stocks, specifically mentioning ServiceNow, Salesforce (CRM), and the broader concern that AI might diminish the need for software. Ray Wang, Chairman of Constellation Research, countered this narrative, arguing that these stocks are currently undervalued and the market is overreacting. His opinion carries significant weight within the industry.

II. Economic Data & VIX Analysis

January home sales data showed an 8% decrease from December, but this was not considered a major market driver. The primary concern was the impact of AI sentiment on software valuations. The VIX experienced significant intraday volatility, jumping from the low 17s to above 19, a nearly 10% increase. This rise in the VIX was attributed to market uncertainty. The discussion highlighted the importance of monitoring the VIX, particularly if it approaches the 20 level, and cautioned viewers about the upcoming holiday weekend potentially exacerbating market movements. The VIX chart showed a consistent upward trend throughout the day.

III. Prediction Markets & Hockey Betting

The concept of "foreshadowing" was explained as a predictive element, illustrated by a bet placed on the Kelshi prediction market for a Czech Republic vs. Canada hockey game. Canada was heavily favored (84% win probability), demonstrating the ability to trade positions even during live events, similar to Super Bowl betting. The hosts expressed confidence in Canada’s dominance in international hockey, citing the professionalization of the Olympics.

IV. Jeff Garbaz – Short Interest & Opportunities (Guest Segment)

Jeff Garbaz, an expert on short selling, provided a detailed analysis of short interest levels across the NASDAQ and New York Stock Exchange. Key takeaways:

• All-Time Highs: Short interest on the NASDAQ exceeded 19 billion shares, an all-time high, while the NYSE is approaching record levels (18.658 billion shares).
• Aggressive Shorting: Shorts are actively adding to positions in a volatile market, indicating a stock-picker’s environment. Garbaz warned that excessive shorting could fuel a significant rally if positions need to be covered.
• Walmart (WMT): Shorts have aggressively added to positions in Walmart, reaching 100% short intensity, despite the stock’s price increase.
• New Burger (NVBR): A particularly striking example – shorts added 19 million shares to a 13-cent stock, highlighting a high-risk, high-reward scenario.
• USA Rare Earth (USAE): Shorts increased positions ahead of a deal announcement, suggesting potential insider knowledge or a contrarian bet.
• Other Targeted Stocks: Craft Hinds, RRIT Tech Robotics, and Cipher M were also identified as targets of aggressive short selling.
• Potential for Short Squeezes: Garbaz emphasized the potential for significant profits from short squeezes if the market trends upward.

Garbaz’s analysis is available through the “Rebel Squeeze Play” subscription services (Elite and Pro).

V. Stock-Specific Analysis – Winners & Losers

• Fastly (FSLY): Experienced a substantial 62% increase following a strong Q4 earnings report and positive Q1 guidance. The hosts advised caution against chasing the stock at its current price but acknowledged its potential.
• NovaCure (NVCR): Saw a 28% jump after receiving FDA approval for its treatment in combination with another compound for adults with pancreatic cancer. The approval was lauded as a significant breakthrough, with the potential to alleviate pain and extend survival. Short interest of 12-14% contributed to the price surge.
• QuantumScape (QS): Fell 8% after reporting no revenue from its core business. The hosts expressed concern about the lack of near-term revenue visibility and advised against investing without seeing unusual options activity.
• Cisco (CSCO): Dropped 11% despite meeting revenue expectations, due to concerns about lower-than-expected profit margins.

VI. NFL Turnaround Potential – Bengals & Giants

The discussion transitioned to NFL teams with potential for improvement:

• Cincinnati Bengals: Identified as a potential turnaround team due to a $60 million cap space, allowing for significant defensive upgrades. Their offense is already strong.
• New York Giants: Highlighted as a potential turnaround under new coach John Harbaugh, despite a dismal 7-27 record over the past two seasons. The expectation is for an 8.5-win season, a substantial improvement. Their cap space is limited (around $10 million).

VII. Closing Remarks & Market Timing

The broadcast concluded with a reminder about the market’s closure at noon on Friday due to President’s Day, leading to increased time decay for options traders. The hosts announced the absence of a “Rebels Edge” broadcast on Monday and confirmed their return on Tuesday at 1 p.m. Eastern time.

Technical Terms Explained:

• Float: The number of shares of a stock available for public trading.
• Time Decay (Theta): The decrease in the value of an option contract as it approaches its expiration date.
• Cap Space: The amount of salary cap room a team has available to sign players.

This summary aims to provide a detailed and specific account of the broadcast, preserving the original language and technical precision of the transcript.