A Full Blown Casino

The daytraders are having a field day with this market.  They are pumping and dumping tickers left and right.  It was EV stocks in November, and the flavor of the month in December is biotech.  It only takes a few hot runners going up hundreds and even thousands of percent in a day to get the retail punters super excited about a sector.  How about this chart for a spike to the moon?  Just a casual 2400% move higher in one day. 

These are the type of moves that get daytraders coming back for more, trying to find the next $GLSI.  Today, they have crowded into another small cap biotech, IMMP, up a casual 180% as I write.  

You had craziness like this in 1999 and 2000, with one sector being hot, and then suddenly, out of the blue, another sector becomes the one that all the traders chase after.  In early 2000, suddenly biotech became the hottest sector on the planet for a brief couple of months.  In 2000, it was from internet stocks to biotech stocks.  It is eery how similar the baton is being passed from the long running hot EV stocks to the suddenly hot biotech names.  

There are no fundamental reasons for the rise of biotech.  It is all based on price action and momentum, and hoping to find the next big mover going up hundreds of percent in a day.  It is lotto fever in the stock market.  That is why so many retail investors are buying calls to try to hit that home run, that one trade that makes several hundred percent in a week.  

It is dangerous to play in these waters, especially if you are playing the hottest names.  I am sure quite a few traders blew up on GLSI, both on the short side on the parabolic move higher, and then halt fest move lower from over 150 to 50 in an hour.  

The quant funds with their algos are all over these stocks, manufacturing short squeezes, and then panic dumps from the longs on the other side.  It is casino capitalism.  A bull market that seems to have lasted forever has finally sucked in the retail crowd.  A 1999-2000 deja vu moment in time, where optimism is through the roof, volatility rises, and crazy moves happen.  

This is an unstable state of the market.  This level of speculation usually doesn't last long.  Dumb short term money is driving the markets now.  The smart money don't create these crazy moves in stocks.  The dumb money does.  Eventually, money transfers from the dumb money to the smart money.  When the dumb money goes back to being just a bit player in the stock market, without the ammo to create these wild, crazy charts, then we'll return to your staid, boring 2012 to 2017 type of market.  Until then, make hay while the sun is shining.