Take Out Your BlackBerry, Let Me Show You What Meme Mania Looks Like
One chart illustrates well what's been happening in the market this week — and it's not healthy. Plus, a look at an out-of-favor semi, and three A-list requests: Adobe, Amazon and AMD.
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The Market
I have to start with the volume on the Nasdaq Tuesday. It was approximately 7.3 billion shares. It’s not easy to tell on the chart below, but you can see, dating back to early 2021, the Nasdaq sporadically trades more than seven billion shares. Almost every one of those is either an options expiration day or a Russell rebalancing day, or some such day specific to high-volume trading.
But now glance all the way over to the left of the chart and you will see in early 2021 there were a lot — an awful lot — of 7-plus billion share days. That folks, was the meme days of the market. And Tuesday's 7.3 billion share day was not an options expiration day or a rebalancing or any other such type of day. That is Meme Mania.
In fact, three of the four most active stocks on the NYSE Tuesday were meme stocks: AMC Entertainment AMC, GameStop GME and BlackBerry BB. Together they accounted for approximately one billion shares of volume. Monday they accounted for about 15% of the volume. Today it was up to 21%.
As you can see from the chart above this can go on for a long time but ultimately it is not what makes for a healthy market.
Overall breadth remains a positive for the market although the number of stocks making new highs has not expanded in a week. And we are overbought heading into the CPI number Wednesday. It wouldn’t surprise me if we make a new high and can’t sustain it as the week goes on. The concern over the consumer that was so prevalent last week seems to have been forgotten.
I will end by noting that the pop in the VIX on Monday was enough to move the Daily Sentiment Index (DSI) up to 14, but Tuesday took it back to 11. It’s just that kind of market.
New Ideas
On Monday I was bullish on Freeport-McMoRan FCX and it had a nice pop Tuesday. Do not chase it because the DSI for copper is now 88. Another day of rallying and that DSI is probably going to be back at or above 90.
I also recommended a semiconductor Monday. Nvidia NVDA had a nice reversal but I maintain that over that $930 area and I think it tests the early March high.
Then there is out-of-favor Intel INTC. Sure it is out of favor for good reason but in the interest of finding down-and-out stocks, this one qualifies. Maybe it can even fill that gap to $34.
Several of you keep asking about Philip Morris International PM. A few weeks ago when it was at $95 I said it was buyable. It has had a nice run but is back at resistance. Unless it can gap up over this $100 resistance area I think it is going to take more work for it to get going, so I’d be in favor of taking a little off the table here.
Today’s Indicator
The McClellan Summation Index is still heading up. Due to all that volume on the Nasdaq its Summation Index now needs a net differential of -5.3 billion shares (up minus down volume) to halt the rise. That makes it overbought in the short term.
Q&A/Reader’s Feedback
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Today must be "A" day as all the requests start with the letter A!
I have so many conflicting thoughts on Adobe ADBE. The first is that I would love to see it fill that gap around $435 from last June. That would probably make it oversold enough for a good bounce. Another thought is that there is an unfulfilled longer-term target around $375. So maybe we should wait until it gets there. And then there is the bullish side that wonders if Tuesday’s pullback is a retest of the late April low.
If you opt to buy ADBE here, then you know you’re wrong if it breaks that late April low. I just don’t think it is very clear. I would say I lean toward being a buyer, but it’s a question of exactly where.
I liked Amazon AMZN months ago and it has not done anything wrong. In fact, that late-April gap down followed by the gap up has left an island down there. It just looks to me like the stock needs to do some sideways work. Similar to the way Nvidia NVDA went sideways for a few weeks to develop a pattern we can discern. I’ll call AMZN a hold for now.
Advanced Micro Devices AMD looks to be trying to form a very small head-and-shoulders bottom. I would not want to see it trade much under $147 though.
