Dow jumped 369 pts at the close nullifying the previous day's loss while the S&P500 closed at 2971.61 inching ever closer to the 100 day MA and the psychological 3000 mark. A main source of market exuberance is retail buying, and I indicated previously my thought that social isolation and access to stimulus check spurred market speculation and this is now confirmed by an AFR report that early access to super has been frittered away by gamblers in online gambling and wagering (stockmarket could be one of them). And look at this extract from Zero Hedge below
As Bloomberg reports, small options traders are bullish to a point that signals trouble for U.S. equities, according to Sundial Capital Research. “Last week, the smallest of options traders, those with trades for 10 contracts or fewer at a time, opened a new record of net bullish positions,” Sundial President Jason Goepfert wrote in a note Tuesday. In comparison, very large traders, those with trades of 50 or more contracts at a time, haven’t been betting so much on a rally, he said.
That has widened the spread between small- and large-trader net bullish positions to a record, with the gap jumping “like it did in 2008” in the past couple of weeks, he added.
All of which reflects on the buying panic by small millennial retail buyers...
Extremes in the data have consistently led to poor market returns, Goepfert wrote.
“The data from last week is disturbing,” Goepfert wrote.
“It clearly shows that the smallest of traders, who tend to be the most consistently ill-positioned at extremes, have gone aggressively long, in a leveraged fashion.
This has a strong tendency to lead to lower prices over the short to medium term.”
But, as Bill Blain summed up succinctly earlier:
"The big risk is that people are going to tire of this B/S.
Bank analysts and big investors trying to look past the vaccine/treatment noise, past the Central Bank puts, and focusing on fundamentals all say the same thing: Stocks are massively overvalued ahead of a looming recession. Corporate bond yields need to reflect rising default risk. Simple as. "
You only just have to look at Facebook (FB) share price, it has just hit a 52 week high of 231.34 before settling at 229.97- tells me this is akin to my swine flu analogy - market participants are now paying for FB higher than before COVID19 and its economic aftermath which has significantly and adversely impacted the advertising market on which FB depends on. Because it is a stock retail buyers can relate to.
We are reaching a point of market exuberance that is once again becoming dangerous , market participants ought to be wary and measured when we see indications like ones above.
Gold and Silver had a quiet day today holding levels but silver stocks continued its rise with Pan American Silver making another new 52 week high while junior silver miners ETF put on 2.3%.
Stocks, Bonds, Gold, & Oil Pop As Dollar & Crypto Drop
by Zero Hedge
Wed, 05/20/2020 - 16:01
The mania continues...
Stocks all rallied hard today after yesterday's brief breather, but still, just look at Small Caps and Trannies today...
Oh and because it was a Fed Minutes day, stocks had to rally! Another test of the 2950/Fib retrace level with no solid breakout...
S&P could not break its 100DMA...
"Most Shorted" Stocks surge out of the gate again amid yet another squeeze... Source: Bloomberg FANG Stocks rallied to new highs... again... Source: Bloomberg
Bonds were bid... Source: Bloomberg
Gold was bid...
Silver was bid...
Silver outperformed gold once again... Source: Bloomberg
Oil soared again...
As The dollar tumbled once again, falling to the low-end of its recent range once again... Source: Bloomberg
Cryptos were clubbed today...
Source: Bloomberg
And finally, P/Es for tech and the broad market are back at cycle highs... Source: Bloomberg
If the entire world economy is locked down and 325,700 die from a previously unknown virus but stocks didn't really budge much... did it ever happen? Source: Bloomberg
Probably nothing... Source: Bloomberg
