Retail investors feel invincible. The meme stocks (except TSLA) are all doing well, the high beta speculative stocks are rallying, and the most popular big cap tech stock among retail, NVDA is the best performing Mag 7 since the April lows. They have bought more stocks and ETFs so far in 2025 than in 2021, when the everything bubble running on Covid stimulus was at its peak.
The 2022 bear market didn't do anything to discourage them. Instead it has emboldened them into thinking that every correction serves as a springboard to a quick move to new all time highs, like what happened in 2020, in 2023-2024, and now in 2025.
The stocks with the most net call volume are outperforming, another sign of heavy speculation on more upside.
The bull/bear surveys, which are less important, but are also showing signs of complacency and high optimism. The NAAIM survey number is now above the highs from mid February, and around the post Trump election euphoria levels.
Technically, the market is looking overextended as its shooting straight up for almost 2 weeks since the Israel/Iran ceasefire. You had a beat in the NFP number an a big rally ahead of July 4 weekend. Over the weekend, you had more can kicking / TACO on tariffs as the deadline moves from July 9 to August 1, according to Lutnick. You had the BBB pork bill get jammed through Congress so that's another bit of "good" news for the market. So much "good" news in the market lately!
As the call open interest accumulates and call volume rises, you build up a gamma squeeze higher as we get closer to monthly opex. This can result in an overshoot which present good shorting opportunities. We are 1-2 weeks away. Expecting the "wait till after July 9 tariff deadline to buy" chicken little bulls to start quacking and buying the strength this week. Sitting on the sidelines, letting the bulls take this as high as they can before taking the other side.
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5 comments:
We have TACO to August yet market trades heavy, still looking for a pop higher?
Yes, still looking for one last rally higher, likely within the next 2 weeks. I don't expect a big rally from here, as I see bullish positioning is getting more saturated. Nasdaq still trades strong. Want to see Nasdaq weaken vs SPX if you are bearish short term.
No more big up days left. Market just waiting to roll over.
Is it time to put shorts or wait some more?
I'm waiting till next week. We are almost there, market often tops during opex week. Perhaps after the CPI number comes out on July 15.
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