DD: Impact of low XRT shares outstanding/extreme redemption on GME price
Hi everyone, hope you're all doing well, before I begin I would like to comment on my last post that tackled the Chicago Exchange volume.
I think we can all agree that this ended up being a nothing burger for our stock, or at least signaled a strong downtrend, if I was trying to look at that data in the most optimistic way I could, I would say that we did have a price surge, immediately the day after the first spike:
But I won't look at it that way, to me it seems that this indicator only points to insiders buying or something else entirely, it isn't consistent nor is it really a clear signal for future bullish movement, which honestly left me disappointed since I really thought we were onto something there at first.
What I took away from that whole ordeal was this comment that was left on the post, I want to thank the user WhatCanIMakeToday for leaving it.
I completely forgot the statistics I was taught at college but this gentleman reminded me that there is a way to be more accurate/less arbitrary with my data dissections, a lesson I kept with me for these past few months.
Fast forward to today and I finally found a way to use it. I watch Richard Newton daily and what I found especially interesting was him tracking the outstanding volume of XRT and the whole idea that they, via redemption and creation, get basically infinite supply of GME on demand to nuke the stock, when they want, this of course creates FTD's and problems for them down the line if abused.
This idea peaked my interest especially when I saw Richard comment on multiple occasions how low they were dipping the outstanding recently with extreme amounts of redemption (Removing ETF shares from the Market). I saw him highlight one of the recent days red in his spreadsheet and that got me thinking, how often do they get it this low? And is there a trend to what happens next?
I took data from Richard's sheet, which covers the last 1315 trading days of XRT. I calculated the 2 standard deviations and got the following results (Keep in mind I was only looking at the lower limit since I am only interested in the days where they dropped the outstanding the most).
Only 6/1315 days fall below the lower limit of 2 standard deviations
Only 6 results. Firstly I want you to notice that the highest one here is 2.6 million shares outstanding, while the day I showed you before, that happened recently, on the 24th of February, stood at 2.7 million shares. I found it really annoying that it didn't fall under this criteria, but then I realized that you can do 1.99, 1.98, 1.97... standard deviations and so on. So you could say I'm cheating, but by lowering the threshold to 1.97, 24th of February popped up.
With 1.97 standard deviations, there are 7 results
Now I guess you could argue that this became arbitrary again and that I could keep lowering it and adding more dates to the final result, but please keep in mind that no further results get added to this list until you drop the criteria to 1.79 standard deviations. I believe this leeway of 0.03 is not statistically significant, If I'm wrong, please correct me in the comments.
So if you can swallow this, lets talk about the results. I would like to start by explaining the reason these are color coded, on my Chicago Exchange volume DD I believed multiple days/spikes were part of the same event (for example multiple days of RC buying shares), so I grouped them together, the same applies here.
What's different about these results (compared to the ones from Chicago Exchange DD) is that they are consistent, they always gave the same result, this of course can change, but as of now, its the same. They also seem to be a lot more rare.
The result that these events gave was that each of these (even this recent one) was followed up by a strong price decline in the coming days/weeks, but always ended in a strong price surge anywhere from T+27 to T+39. I labeled the exact prices in the picture above so take a look at it yourself, I'm sure you will be able to recognize some of these dates..
What this data tells me is that intense XRT redemption kicks in and outstanding goes really low when they are really struggling and need to get as much GME or need the stock down asap no matter the cost. This cost gets paid in the T+27 to T+39 window.
It seems to me the harder they push it, the harder it bounces back. The price has declined since the 24th of February event from 26.39$ to 22.08$. We already knew they were struggling with XRT on Reg Sho the second time in the last 3 months.. but this seals the deal for me. We are currently at T+11 so I expect the price to dip even lower in the coming days.
T+27 will fall on the 2nd of April and T+39 will fall on the 21st of April. With Richard already predicting some price action within this time frame and with us getting the most hyped annual report yet, possible guidance, the best earnings/yearly profitability in the last 7 YEARS and Gamestop having 4.7 Billion in cash, I believe we are due for an insane comeback in the next month or so.
I want to state that this isn't financial advice and honestly, with mango man shaking up the markets and hedgies having all the tools in the universe at their disposal, I wouldn't be surprised if they somehow pushed this further into the future... (so please don't buy short dated options). But even so, I believe there are a lot of reasons to be optimistic about the short-term (and long-term) future of our stock.