Has Meme Stock Mania Returned on the Same Day That Investors Up Their Hedges?

A couple of weeks ago, I opined right here that everyone says they want better breadth, everyone says they want an expansion of stocks beyond the Mag 7, but yet, when we get it, and it comes at the expense of the Mag 7, folks aren’t very happy. They surely don’t get giddy.

At the time, I noted that UAL had had one heckuva move up (and has rallied more since), and whenever I pointed that out, invariably, I would get, nice chart; what else ya got? So to add to this view that I have, let me point out that on Friday, I saw anecdotal evidence of this as well.

Breadth was terrible Friday (it is what helped us get to an oversold condition), but the mega-cap tech names hung in there all day. The commentary I got from that was, basically, who cares if breadth is bad; the stocks that count went up.

Now I give you another, non-anecdotal reason I believe this to be true. Monday saw the best breadth the market has had in weeks. It saw the Russell close at the high of the day. The Midcaps (remember them?) didn’t close at the high of the day, but unlike the QQQs and the S&P, which closed at the low of the day, they, too, were up.

And what did the put/call ratio do? Chime in at .99, the highest reading since October 4th. The ISE Equity call/put ratio was the lowest since mid September. Remember a high put/call ratio and a low call/put ratio are saying the same thing.

Oh I know someone will surely tell me it’s folks hedging the election. It’s folks hedging the mega-cap earnings this week. It might all be true, but I don’t like to rationalize an indicator. Folks decided to buy more puts on Monday than they have been.

I will note, though, that the new highs did not expand even though breadth was so good (72% of the volume on both the Nasdaq and the NYSE was on the upside). I would also note that similar to my comment last week about meme stocks making a return, it was a bit of meme-mania out there on Monday. When GME is up ten percent on the day, we know folks are speculating.

But the real story is bonds. The TLT broke that line I had drawn in. It was so clean and clear and yet much as I thought it would hold, it did not. Yet I can’t give up on the bonds. There is a lot of support in this low-90s area, but for me, it is as if everyone has collectively shrugged over higher rates. As a contrarian, that puts my antenna up.

The other thing that puts my antenna up is that the Daily Sentiment Indicator (DSI) for the bonds became a teenager on Monday when it chimed in at 19, the lowest reading in a year.