The VIX rose twice recently, and reached its peak as the NASDAQ Composite 100 fell.

Thank you Koyfin for the visualization.

The VIX is the sense in the market of the future volatility. It drives the price of insurance (calls and puts) on major indices like the QQQ and SPY.

I look at this like a cause and effect, but I might have gotten it backwards. I usually think that the VIX reflects nervousness in the market, fear of future volatility, and therefore it goes up, and then stocks react. It could be that way for some investors. 

Alternative Hypothesis:

What if the cost of calls and puts goes up, because investors are buying more of them to hedge the market, or even to profit from a change in the market? What better way to profit from a sell-off than to buy calls and short the market (upside protection), or to buy into the market and buy puts to protect against a fall (downside protection).

When we look at the attached chart, it looks like the market purchased more calls and puts, and drove up the price of insurance, then the market fell, the options blew out, and the price dropped again. As the price drops, and less insurance is purchased, the market rises again and the cycle continues.

Not sure this makes sense in the real world, but the chart is a little too perfectly aligned to be a coincidence.

VIX is low, market rises. VIX rises, market falls. This is only true in NASDAQ 100 and to some extent the S&P 500, but not the RUSSELL 2000. That market moves independently of the VIX, or if anything this last time it went up with the VIX. That could be a coincidence, or just market participants making two bets at once (sell the large caps while buying the small caps).

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The largest stocks, typically growth stocks with high expectations, fell yesterday. The largest market capitalization stocks, the ones where the money flows into when people buy passive index funds (like the S&P Index 500 or NASDAQ Composite 100) were lower, and significantly so.

As seen above (thank you Finviz for the three visualizations), the largest rectangles tended to be red, with a few notable exceptions in "main street stocks" like Home Depot, Cat, Exxon Mobil and Chevron, Berkshire Hathaway, Coke and Pepsi, Merck, J&J and Abbvie.

The homework we did last night showed 16 of the top 26 US listed stocks, by market capitalization of equity, fell yesterday and some of the declines were material, significant and meaningful. NVIDIA and TESLA falling more than 5% in a day. Most stocks being down 2% or more. This has the impact of reducing the total value of the stock market, without most people noticing.

Technical analysts would call this day a distribution day, because people sold the most valuable stocks (maybe closing out long bets), and also bought smaller stocks (maybe closing out short bets). This is our hypothesis of what happened, investors moved to the sidelines on Thursday.

You can see the largest rectangles, by far, were red. The losses were focused on the most valuable stocks.

This chart, also from Thursday, July 11, 2024, also shows the impact on stocks. This view is by industry, and only shows S&P 500 Equity Index stocks that fell on that day (1-day change).

The silver lining is that small caps screamed higher yesterday. This is an ETF that we like that moves with small capitalization stocks in a magnified way. It rose almost 11% yesterday.

In conclusion, what we saw was an exit of the equities market (maybe exiting long positions), and a rotation of buying into small cap stocks (maybe to close out shorts).

We sell analysis of individual stocks, and we sell access (on a daily basis) to our full market analysis, which we call the Chicago Quantum Net Score analysis. If you would like to learn more, give me a call at 312.515.7333 or check out the website at www.chicagoquantum.com.

New Update: The June 28, 2024 short data came out from NASDAQ and short interest has more than doubled to just over 300,000 shares. With the move to OTC on June 18, 2024 (market open), 1.4 million shares outstanding, and another 1.05 million warrants in the money, this could be a wild ride as shorts cover, or don't cover, and wait for resolution.

$TBLT: Where did all the new shorts go?

Short volume lower than I have seen in many months!

ToughBuilt Industries: Confidently going into OTC!
In the chart below, we plotted the last four trading days against short volume (Source FINRA), excluding 'excluded short volume.' This is calculated as total shorts (all exchanges) divided by total volume.

We have seen this percentage fluctuate around 50% for all the months we are in this stock, with likely as many days above 50% as below. 

​Thank you FINRA for the data.

We do see very few shares available to short. Thank you shortables dot com for the data. Also, the cost to short stocks is far higher than it has been in the past, running around 100% of the price over the year. So, you pay for the stock anyway, so why short it?

What is our hypothesis?

1. The stock is seeing lower volume, after a period of very high volume. It is possible that the 'short squeeze' crowd has accumulated the stock and is ready for a huge burst of price before the stock moves to OTC. This gives the 'pumpers and dumpers' a chance to exit their stock position with a gain while the stock is still on NASDAQ. Confidence: 10%

2. The stock has doubled the float since the offering, from 770 thousand shares to 1.4 million. There are an additional 1.05 million warrants that are near the money at current prices. Those warrants gave investors the chance to short the stock already, including naked shorts that will be covered with warrants. Maybe the shorts are already 'all in' and covered by warrants? Confidence: 50%

3. The uncertainty over the company's latest news on July 3, 2024 could have been priced into the stock via the shorting. The company's stock, in our opinion, is undervalued against fundamentals, assuming they are a going concern and continue to trade on NASDAQ. It is possible that the stock would have run much higher had the uncertainty around their board of directors and financial statements been absent. Confidence: 20%

4. The stock has been fully shorted already, and since June 20, 2024, based on the recent doubling of the stock price. Confidence: 20%

Where do we go from here?

We love the company and the company's stock. We think this stock undervalues the company and is  trading at a significant discount given the history of dilution (which we think is behind us based on improving fundamentals), and the uncertainty over their financial reporting. The 'big date' of July 18, 2024 when the stock gets suspended from trading and delisted at market open puts a huge risk factor on this stock.

We will be buying more, adding to our long position, after the uncertainty is behind us.

We are an investment advisor, registered in Illinois. We sell investment advisory services for a fee, and offer an analysis of ToughBuilt, delivered by way of a two-hour conversation, for $250. We are non-discretionary investment advisors, so you pay us for our time, efforts and expertise, not based on how much money you invest.

Good morning to my faithful readers. There is a significant update on ToughBuilt Industries Inc., NASDAQ ticker symbol $TBLT.

We sell investment advice on this stock, and are open for business today. Please reach out and we will tell you what we see.

​By close of business tomorrow we will be publishing a blogpost on the stock.

We are at market closed on July 3, 2024, with a long weekend ahead of us. I am happy to be able to relax with family, friends and fireworks to celebrate our nation.

I check the publicly available bills of lading on ToughBuilt, and boo-yah, another hit for ToughBuilt shipping StackTech TM products to Lowe's. July 2, 2024 on the Maersk Essen, we see 1,098 cartons weighing a combined 30,752 pounds shipped to Lowe's to fill two orders for a total of 1,722 units of StackTech. We found eight bills of lading showing shipments arriving on June 24, 2024, on both the CMS CGM Endurance and the Gustav Maersk to Lowe's both in Seattle and Los Angeles, and each BOL had about 550 cartons.

We generally see the first generation of StackTech products in Lowe's and occasionally they get in the 3-drawer large box which is what we would buy as the middle of our stack.

I have been buying product for personal use (and gifting) from Menards recently, mostly bags and tools. I also bought a Quickset Workbench which has been great for fixing interior doors. Solid and stable. I can plane and sand a large interior door on it with only two clamps. The product selection on the shelves is thinning out in Chicagoland, which means that Menards may not be restocking my local stores. They have been getting shipments to fill my orders, which I pick up in-store.

There is absolute silence in terms of press releases, SEC filings, and social media.

This stock has been at zero borrow (no shares available to short) since the run up in share price happened on June 20, 2024.  Consistently zero borrow, or the ability to borrow maybe 3000 shares, which goes to zero quickly. The cost of borrowing (the fee) now exceeds 100%, so shorting the stock for a year costs the full price anyway, plus what is paid when buying the stock to cover the short.

We have no available financial statements (10-K and 10-Q) since September of 2023. This has no immediate impact on investors, but if it continues then the stock moves to an over the counter listing, and is more costly to trade.

We remain optimistic on the stock and the company. Good luck to all.
Jeffrey Cohen
Happy Fourth of July Holiday for those who celebrate.