Memes Capture Attention and Volume: What a Difference a Week Makes
What happened to all that concern about the consumer? Nonsense like these meme stocks tell me folks are not bearish anymore.
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Those meme stocks may be capturing all the attention but they are also capturing an awful lot of volume. Three of the four most active stocks on the NYSE on Tuesday were the meme stocks. Together, AMC Entertainment AMC, GameStop GME and BlackBerry BB (yes, that stock is still around!) accounted for approximately one billion shares of trading on Tuesday.
With the NYSE trading about 4.8 billion shares on the day those stocks were about 20% of the volume on the NYSE. That is up from 16% on Monday.
Then there is the Nasdaq. Total volume for the Nasdaq on Tuesday was 7.3 billion shares. That is a lot. It rarely gets over seven billion shares. Oh sure, you can see all those spikes in volume on the chart, below, but notice they are mostly spaced apart. That’s because we tend to get these high volume readings on the final day of the quarter, on a quadruple witching for options expiration, on a day where the major indexes are rebalancing, etc.
But if you look at the far left side of the chart you will see they aren’t so spaced apart. There is a giant clump of volume over seven billion shares. It’s hard to tell, but it went on for about six weeks back then. And that was the first quarter of 2021, the last time we had Meme Mania.
Sure, the breadth is good now. It was good then too. Heck, back then the Nasdaq was clocking in at 700+ new highs on a regular basis. I remember because I spent days sifting through the lists noting how the SPACs are triple counted. But we don’t have SPAC mania now. Maybe that’s why the number of stocks making new highs is still under 200 for the Nasdaq.
We also have more than just technology stocks working now, so there is a difference. But nonsense like these meme stocks tell me folks are not bearish anymore.
Yes, they were cautious last week. Remember the discussions about the consumer and how the consumer is pulling back? And how 70% of the U.S. GDP is the consumer so that can’t be good. That was the chatter last week. I heard none of that this week.
Now I heard comments like "the market will embrace the CPI no matter what it is." What a difference a week makes.
We are still overbought. The Nasdaq’s McClellan Summation Index, where I use volume, is heading up (bullish) but it now requires a net differential of net negative 5.3 billion shares (up minus down) to halt the rise. That’s a lot and what makes it short-term overbought. I do believe it is being influenced by all that volume in the meme stocks, but that would be rationalizing an indicator, something I prefer not to do.
I have no idea what the CPI will bring. I have said all week that if it is high I think we have to remember that so many prices have come down in the last month (namely energy). I do think if the market makes new highs it won’t last long. Short term we have got to work off that overbought condition.
