Wall Street Has 2 New Favorite Phrases. I’m Not Buying Either One.
These catchphrases have certainly caught on in the past week. But do they hold water for what’s happening now — or are they just annoying?
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I am always amused at Wall Street’s ability to come up with a phrase that catches on so readily. Once it catches on you begin to hear it everywhere. It becomes a mantra. Sometimes it is just annoying and sometimes it’s just downright dumb like when they decide an individual stock is “in a bear market.” That’s both annoying and dumb.
In the last week there are two new phrases that have caught on like wildfire. The first is “clearing event.” Apparently, we are told, July was a clearing event. We used to call them whooshes. Or whacks. Or clean-outs. That’s what happened to the semiconductors in July according to these folks. That big decline in the SOX was a “clearing event” for the market as a whole.
I take issue with it because the only thing that got cleaned out was the semis. And now the semis are just so ordinary. No one cares that they sort of sit there. Remember when the semis were the market and so many folks declared as long as they were okay, the market was okay? Now that they are ordinary no one fusses. Maybe they will after Nvidia’s (NVDA) earnings this coming week.
Or perhaps it’s because they have moved on to Bitcoin and metals being back in vogue.
The other phrase has to do with the bonds. It seems the move in bonds is only a problem if the “rate of change” goes awry. So higher rates are just fine as long as they don’t go higher too fast. Very few are willing to tell us what the line in the sand is for such a change, though. As I have said, my guess is their line in the sand has to do with stocks. As long as stocks don’t collapse, they think higher rates are okay, or the rate of change in rates is okay.
Perhaps that’s why folks loaded up on calls on Friday. The put/call ratio was the lowest since the early days of August and before that early June. The 21-day moving average of the put/call ratio for ETFs has been under 1.0 eight times since August 5. Why have I picked August 5? Because that was essentially the fourth day of the rally off the lows, which is when the rally stalled out (arrow).
Now look at the 21-day moving average of the ETF put/call ratio and you can see the result of all those calls.
Does that look like a market that is scared and prepped for a “clearing event” or one that sees a big move in the “rate of change”? To me it looks like a market prepared for a move to S&P 8000. Perhaps the call buyers will be correct, but I think the volatility picks up again this week.
