US Stock Market: Signs Of Bubbles
Anxiety among investors mount over prospect of bubbles linked to the US stock market in a context where major equity indices have repeatedly set records since early 2021. Despite an unprecedented wave of monetary and fiscal stimulus can justify a part of the move, several indicators highlight extreme behaviors and also point to “bubbles” territory (when looking at historical patterns). Although it doesn’t mean that past performance will repeat, it raises questions about the current environment. Using Twitter, I made a compilation of charts that attracted most attention recently. Feel free to comment on my social networks.
Sentiment
Closing the week with a special update on Sentiment:$SPX Daily Sentiment 50dma near the Top 5% most overbought days in history (34 years).
Could extend a bit higher, but history suggests time's running out.
Monitor closely for signs of a reversal – will revisit, stay nimble. pic.twitter.com/KjHwwIZ3el
— Macro Charts (@MacroCharts) January 22, 2021
BofA's fund manager poll shows a record amount of risk taking: https://t.co/5Cu5bhdvmA pic.twitter.com/VI5V8W0FjW
— Jesse Felder (@jessefelder) January 19, 2021
Optimism continues to ratchet higher, with the clicking sound today being produced by NAAIM exposure index surging to 113% – only other time its been this high was Dec 2017.
Sentiment excesses still offset by strong breadth – but if breadth starts to falter . . . pic.twitter.com/hUv7MnqHnY
— Willie Delwiche (@WillieDelwiche) January 21, 2021
Goldman Sounds The Alarm On Stocks: When Euphoria Is This High, "It's A Good Time To Reduce Risk" https://t.co/RQqM77nVUF
— zerohedge (@zerohedge) January 17, 2021
Euphoria-est pic.twitter.com/cVjOqtS71s
— zerohedge (@zerohedge) January 23, 2021
Non-profitable Companies
No profits? No problem … basket of unprofitable tech companies has gone parabolic in past year
[Past performance is no guarantee of future results] pic.twitter.com/adkWwkHGVj— Liz Ann Sonders (@LizAnnSonders) January 19, 2021
Shares of money-losing U.S. #Tech companies soar almost fivefold in 1 – Bloomberg TV Chart pic.twitter.com/PjlxjxRsOA
— Christophe Barraud (@C_Barraud) January 22, 2021
Small Caps and Penny Stocks
Small caps like the Russell 2000 index look extremely unattractive now.
In real estate, agents tell you "this is a buyers market" or "this is a seller's market".
With that in mind, we believe this is not a great buying opportunity, instead this is a great selling opportunity. pic.twitter.com/DOTb3qM2xb
— Tiho Brkan (@TihoBrkan) January 23, 2021
Chaser: the market's smallest members (the Russell Microcap Index) are zooming higher. pic.twitter.com/3Caql259gL
— Callie Cox (@callieabost) January 15, 2021
More than 1 trillion served.
Even before another spike in recent weeks, there were more than 1 trillion shares traded in penny stocks in December .
That's trillion with a "t.". A 1 with 12 zeros. pic.twitter.com/nTEWQbaNKD
— SentimenTrader (@sentimentrader) January 13, 2021
A Handful of Penny Stocks Just Made Up a Fifth of U.S. Volume – Bloomberg
*Six companies made up almost one-fifth of trading Monday.
*Link: https://t.co/Qn77Llatrz pic.twitter.com/LTWTJNHQYj— Christophe Barraud (@C_Barraud) January 13, 2021
Russell Microcap Index: More than 86% of the index’s components, whose median market value is $319 million, topped their 200-day moving average on Friday and Tuesday – Bloomberg pic.twitter.com/CUnSs5zHLe
— Christophe Barraud (@C_Barraud) January 14, 2021
Small caps anyone? #equities #Russell2000 pic.twitter.com/kxKFAQzJx9
— jeroen blokland (@jsblokland) January 25, 2021
SPACs
#SPAC | Goldman Team Sees ‘Unsustainable Excess’ in Parts of U.S. Market – Bloomberg
*Link: https://t.co/UBw53L6UWJ pic.twitter.com/ToF9HRt5PA— Christophe Barraud (@C_Barraud) January 25, 2021
The first 3 weeks of Jan have already seen half the SPAC issuance of all of Q4… which was a record quarter for SPACs pic.twitter.com/t5fzf8QzAW
— zerohedge (@zerohedge) January 25, 2021
Equities and ETFs’ Positioning
BofA Securities Inc.’s gauge of cash held in institutional portfolios fell to the lowest (3.9%) since the firm started measuring it, suggesting fund managers feel little need of a cushion – Bloomberg
*Link: https://t.co/PyW1gWWGM6 pic.twitter.com/JEu70QRvg6— Macro Brief (@macroandfinance) January 25, 2021
Retail frenzy just starting: and there is trillions more in stimmy checks coming pic.twitter.com/QaVTAjln0t
— zerohedge (@zerohedge) January 23, 2021
Strategist Who Nailed 2019 U.S. Stock Surge Warns on Positioning – Bloomberg
*Link: https://t.co/N3YtGoIikG pic.twitter.com/nCaM1adFa9— Macro Brief (@macroandfinance) January 24, 2021
Short Interest in World’s Biggest #ETF Plunges to Decade Lows – Bloomberg
*#SPY shorts are languishing at around 2% of shares outstanding
*Link: https://t.co/GNYP4zVN3v pic.twitter.com/CD4Q3LiEPM— Christophe Barraud (@C_Barraud) January 15, 2021
the bears are dead, jim pic.twitter.com/I3X7xyLVCR
— zerohedge (@zerohedge) January 25, 2021
Leverage through Options
Small option traders still setting records … number of net bullish options contracts open by small trades is larger than that of large trades (+50 contracts) @biancoresearch @OptionsClearing @sentimentrader @Bloomberg pic.twitter.com/1bCpcnPIYC
— Liz Ann Sonders (@LizAnnSonders) January 22, 2021
We didn't think traders could get any more speculative than they were at the end of August.
We were wrong.
For the first time, small trader call buying (adjusted for equivalent shares) exceeded 9% of total NYSE volume last week. pic.twitter.com/WcyRPHq0dV
— SentimenTrader (@sentimentrader) January 16, 2021
Bullish Stock Bets Explode as Major Indexes Repeatedly Set Records – WSJ
*More than half a trillion dollars worth of options on individual stocks traded on Jan. 8 alone, the highest single-day level on record, according to GS.https://t.co/4n0j8idDIU— Christophe Barraud (@C_Barraud) January 25, 2021
The total equity and index call options (5-day average volume) has exceeded 25 million since Jan. 8th – Bloomberg data pic.twitter.com/gdMplFlcib
— Christophe Barraud (@C_Barraud) January 24, 2021
#SPX | Total open interest in put options on the S&P 500 index is around a four-year low, according to data compiled by Bloomberg.
*Link: https://t.co/AY1VXcHopw pic.twitter.com/akVHBEHcCL— Christophe Barraud (@C_Barraud) January 22, 2021
Equity put/call ratio (5d average) has slipped to its lowest since April 2000 pic.twitter.com/RBIv0Xi0DO
— Liz Ann Sonders (@LizAnnSonders) January 20, 2021
Gamma Exposure
#Options Feedback Loop Revives Warnings in Soaring #Stocks – Bloomberg
*Link: https://t.co/wq1YZ24B9E pic.twitter.com/uwWVuhO6e9— Christophe Barraud (@C_Barraud) January 15, 2021
gamma, gamma, gamma pic.twitter.com/Zs0TmdHoxU
— zerohedge (@zerohedge) January 23, 2021
Insiders
#Buybacks Snap Back Amid Feverish Selling by Corporate Insiders – Bloomberg
*Link: https://t.co/v3sw5Pu1ZF pic.twitter.com/7bI0V8Vshx— Christophe Barraud (@C_Barraud) January 20, 2021
Valuations
7. … e.g. with valuations like this, it's no wonder that insiders are taking some profits
h/t @DuncanLamont2 $SPX $SPY pic.twitter.com/8QVdgx5U14
— Callum Thomas (@Callum_Thomas) January 23, 2021
#SPX | Real earnings yield dipped below zero just before the bear-market declines of 1987, 2000 and 2008, providing a useful warning signal – Bloomberg
*While the level is currently sitting a little under 2%, it’s near the lows of the post-Great Financial Crisis era. pic.twitter.com/nGbGfSpuDH— Christophe Barraud (@C_Barraud) January 19, 2021
Pandemic-Era Central Banking Is Creating #Bubbles Everywhere – Bloomberg
*Link: https://t.co/cVoGNhRk3L pic.twitter.com/xWirsBI7aF— Christophe Barraud (@C_Barraud) January 25, 2021
The #Stocks Bubble-O-Meter Is Flashing Bright Red – Bloomberg
*Another great piece from @johnauthers
*Link: https://t.co/S7e0GaXr2W pic.twitter.com/q5Xbfq8NK6— Christophe Barraud (@C_Barraud) January 25, 2021
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