As much as many media outlets and social media stars are claiming that a new bull market is in session since start of the year, we need to be careful both in translating what happens in the popular indices to what happens in the broader market, and in insisting that the old “bull/bear” trope is useful as an argument in trying to profit in stocks.
As much as people love the SP500 and the NASDAQ, these indices are currently only driven by old-news Big Tech stocks which strong balance sheets have now become somewhat of a safe haven during the ongoing banking crisis. This dynamic has resulted in the most crowded trade in the market, while in truth the rest of the market has consistently thinned, and the rally is on extremely thin legs – one could compare it to a house of cards
Equally, just because people are using the word bull or bear market to describe the environment, this should by no means serve as a signal or condition to be invested in the market (or not). If you hang around social media these days, perma-bull comments and over-traders tend to still get the most attention. Many market tops, choppy markets and false bear rallies have lost a lot of traders money who believed they need to act on the bull-narrative pushed by the Wall Street machine, and many potential profits have been missed by listening to the ever-gloomy bear-narrative around true market bottoms
It is much more rewarding looking at what institutional money as a group is doing to get an insight into what that group of investors that can make or break the market is thinking. Look no further than the best stocks of the market.
Already few weeks ago, I was stating in my weekly market profiles that leadership was unsustainably thin, despite a few quality stocks being under accumulation. Now, the situation has significantly worsened, just to name a few:
- AEHR – sells 42% off price Highs
- ANET – gaps down 17% on earnings, far below support
- PI – gaps down as much as 40% intra-day on earnings
- MBLY – gaps down as much as 30% intra-day on earnings
- ALGM – retraces its complete advance since a primary digestion in January, 30% off the Highs
- FSLR – gaps far below support down on earnings
- IOT – a weak stock in itself with no earnings and overhead supply, fails moving out of a digestion and sells off 24%
- …
This is not action you see in a great market.
A new “bull market” will be obvious if you look for the right things (i.e. a horde of great quality stocks under accumulation), but people likely will be afraid to buy then. The actions of the leading stocks of today, paired with the complacency in the market (general sentiment, VIX, bull/bear ratio) leads me to believe we’re nowhere near a new worthwhile trend in US stocks.
And why try to make a few pennies with high risk, when you can just sit and wait until the real opportunity comes along?
