Sure the Nasdaq Composite climbed 1.4% to 11939.67 on Tuesday, while the S&P 500 gained 0.8% to 3526.65, and the Dow Jones Industrial Average rose 215.61 points, or 0.8%, to 28645.66. The Dow has ticked up 0.4% year, while the S&P 500 has risen 9.2, and the Nasdaq has gained 33%. The ratio of the Nasdaq 100 to the S&P 500, meanwhile, is now highest on record.
But the stock market is not a bubble.
Zoom Video Communications (ZM) jumped 41% after reporting earnings that were more than twice what analysts had been expecting. It’s now worth $129.1 billion, more than International Business Machines’ (IBM) $109.9 billion. Zoom had sales of $663.5 million during its second quarter, while IBM had sales of $18.1 billion.
But the stock market is not a bubble.
The ratio of bulls to bears in the Investor Intelligence Sentiment Index, at 3.7, is higher than 3, the level that has led to selloffs in the past. Citigroup’s Panic/Euphoria index hit 1.13, almost three times 0.41, the level that signifies euphoria. The stock market has been down 100% of the time after reaching that level of euphoria.
But the stock market is not a bubble.
Apple (AAPL) stock gained another 4% on Tuesday, and has gained 157% over the past year; its sales have increased by 5.7% during that period. Tesla (TSLA) dropped 4.7% after announcing a $5 billion secondary offering, but is still up 953% during the past year. Its sales have increased by 3%. “[I] simply cannot believe how far the growth in their market caps have exceeded the growth of their overall business,” writes David Rosenberg of Rosenberg Research, referring to the “’Great Eight’ growth stocks of which Apple and Tesla are but two.
But the stock market is not a bubble.
There are perfectly good explanations for all these things. Low interest rates, quantitative easing, future growth, disruption, the coronavirus, and on and on and on. A bubble is not one of them.
Until it is.
m
Ming Jong Tey Sun, December 12, 2021, 4:45 AM SPX Daily Chart
Based on the comparison between the Percentage of stocks above 200-Day average and the SPX for the past 10 years, the divergence happened since Feb 2021 as the SPX continue to trend higher, the number of stocks participated in the uptrend is getting lesser, deteriorated from 90% to 42% as of last Friday since Feb 2021.
In fact, many growth stocks such as Affirm Holdings (AFRM), CrowdStrike Holdings (CRWD), Fiverr International (FVRR), MercadoLibre (MELI), Sea (SE), Twilio (TWLO), DocuSign (DOCU), Roku (ROKU), PayPal Holdings (PYPL), etc…experienced big drawdowns range from 32%-65% from their all time high.
There are only a handful of outperforming stocks like Apple (AAPL), Microsoft (MSFT), Lam Research (LRCX), Broadcom (AVGO), Qualcomm (QCOM), etc… supporting the S&P 500 index.
- ADVERTISEMENT -
The divergence between the SPX and the stock market breadth are certainly not a healthy sign for the bull market especially it has been persisting for nearly 10 months. It might only take a few early capitulations from the funds to trigger a broad market sell-off when the market is at the vulnerable point.
Q
I retired from the IT field after 38 years. The Nasdaq keeps going up because to the average non-techie, they view software companies as some sort of new magical industry, whereas unlike other brick and mortar industries, you can not eat, drive, wash with software. With the demise of entertainment, travel, dining, and other real contributors to the economy, ad revenues will diminish for Google and FB. Moreover, as far as Amazon is concerned, retailers such as Wal-Mart and Best Buy are gaining an increased online presence and will pose more competition. Whereas the FANG stocks certainly implemented very successful business models, their growth rate no longer justifies their huge PEs. It is now only a question when the market acknowledges this, although it may remain irrational longer than I can afford to hold SQQQ.
T
I was a year out of HS when Carter came along, Jan 77 - Jan 81. He took the 'recorded' inflation rate from 5.22% to 11.83% and interest rates jumped to a high of 22%. The SPY dropped from 510 to 414 and the DOW from 4534 to 3026. Construction, home & car sales, (jobs) etc. came to a halt and I joined the Air Force. The DOW, SPY, and NDX made remarkable gains in Joe's first yr in spite of taking the inflation rate from a 'recorded' 1.4% in 2020 to 6.8% in 2121. On the other hand, the SQQQ has dropped from 15.30 to 5.63 (52 wk low). The infrastructure deal will help select companies while driving inflation and taxes higher, free Gov money has dried up and it's time to pay the fiddler. Higher interest rates are a certainty and if history repeats itself, the DOW, SPY, and consequently the SQQQ are due for major reversals.
m
Jeremy Grantham, legendary investor and pioneer of index fund investing, expects today’s sky-scraping stock market to come crashing back to earth.
Grantham recently told Bloomberg that investors, who enthusiastically drove the stock market to new heights during a global recession, are in for a shock.
“When the decline comes, it will perhaps be bigger and better than anything previously in U.S. history,” he warned.
Grantham predicted the dotcom collapse and the 2008 meltdown of the real estate market — he’s also in charge of about $60 billion as the investment chief at asset management firm Grantham, Mayo, & Otterloo — so he’s worth listening to.
A
Shorting the market is not an easy game but if its timed correctly it can be very lucrative. You have to be a good detective...look for clues. It's similar to saying what do you need to have a fire (fuel, oxygen, and a spark). In the case of the market you have indicators like sentiment, call to put ratios, trendline breaks, volume shifts which are fairly obvious. Then you have more subtle indicators like divergences, intermarket shifts ie with bonds, commodities, price momentum oscillators, interest rate spreads, performance of key stocks, international markets, Dow Theory.
Also consider duration of trends. After the blowdown in March one would expect an uptrend to last quite a while (maybe now is long enough).
Also, if markets are very overstretched above moving averages, they are vulnerable and all they need is a trigger to implode. If they don't get a trigger they will cause max pain for any logical shorts.
IMHO its getting close to the time to buy SQQQ
T
SQQQ EXPLAINER. @Ryan H yea, pretty much like that. I put together a short and long version of what I know. You choose the adventure depending on how much info you need. It simply moves in the opposite direction of Nasdaq and it’s 3X leveraged. So like you’re saying. To keep it simple: if Nasdaq goes down $1 on Monday. This goes up by $3. If Nasdaq goes up $3 this tanks 3X, so SQQQ would loose $9. Through SQQQ you are shorting the Nasdaq 100 index. Which is index of about 100 selected stocks ( versus the full Nasdaq index that has many more). I believe it’s actually tracking 100 of NASDAQ’s largest non-financial companies like Alphabet, Nvidia, Apple, Microsoft, Netflix, but also Moderna. I’m usually just looking at the performance of the reg. Nasdaq anyway since it’s easier. If you need more info I have some more tips below that I collected and that helped me understand it. I’ll add an example of how I’m using it to my advantage. The bottom line is through this 3X leveraged ETF you too have the power to short the market - which is super cool and something that always interested me. If you just want to short NASDAQ on any particular day and get out with some profit the sam day - SQQQ could be your tool. But if you want to hold it and wait for the big tech bubble to burst one day, You can start building your position and hold it too. It’s just more complex, more work and more risky than just buying a piece of sock and holding it, so def read more about it around. I’d start really small so you learn. BECAUSE IT WILL PROBABLY BE A HARD LESSON. Note that you’re betting against all the BIG TECH, TELECOM AND HEALTHCARE. Big stars of the new normal. And since the tech and health are booming - this will most likely keeps tanking. You get the picture, (Until perhaps some bigger correction - which is hard to time). That being said, if you believe the tech bubble may burst soon (like the internet stocks did in 2000) then this could be the ETF to watch. Just a warning-Until the burst happens this WILL keep tanking as Nasdaq keeps pumping. It won’t go to 0. It reverse splits when the price gets too low. I think somewhere between $5-$10 - since big banks don’t like to trade stocks and ETFs below $5. Also, It’s an ETF, so there is a fee percentage you pay for holding it. It’s just as if you would buy a reg ETF. So some fee (like 0.95%) applies. That’s what the managing company of any ETF charges if you buy ETF instead of just individual stock. Finally, there is this decay which in my opinion is just a warning for the long term holders to look at the chart and think twice before putting money into this, since the the number of outcomes resulting in loss is much greater here. But I have a position that I use as at least a little protection against some of my tech investments too. And throughout the time I think I learned how to tame it. So YES you can totally hold this long term if you want to and patiently keep just smaller amount around for THE SPIKES (or one day a bubble burst in which you could become THE mega winner) But to hold it, you need to become super disciplined and learn how to manage your average and constantly keep averaging down with this tanking ETF and taking profit out when the opportunity arises. Def don’t go all in. When Nasdaq recovers, let’s say next week, and this continues to tank you may want to slowly start adding to your position (and start slowly building a position for the next spike, which may be happening more and more often with the increasing volatility (a day trader’s paradise). Then on the spike, you hopefully you make the money back + profit and repeat the mini cycle. On the days Nasdaq corrects this is a fast mover and your profit builds 3X faster. So as you’re holding you are constantly lowering your average - like a NINJA- and your core position ideally doesn’t loose value. This way, you are always having some hedge against any potential burst of this never ending rally. And here and there collect profit too. That’s just how I’ve been using it, and it’s been part of my day trading toolbox for about 6 months now. I love SQQQ and I’m glad I found it since a little short here and there doesn’t hurt. It’s part of the big game so why not take advantage of it. Hope I could help you or anyone else and if you can, please just pay it forward someday, somehow to someone who need help. Good luck. Best, T
M
Another "reason" I got into SQQQ: Not really solid, concrete facts but more year over year "trends". Like the last couple years we didn't see a fall selloff of real "note", and last year it rose going into December end. Being around the markets for a while, I have noticed the tendency of these markets to "take profits" between the end of November and 12 December on a number of times in the past. So, not having that notable selloff in Sept/Oct and not having solid "reasons" for a continuation of the bulls I felt it prudent to take some off the table via SQQQ and lining up some of the other short etf's as I waited for my precious metal mining stocks to make a move next few months. Cheers!
F
Everything is shutting down, Theme parks, Stores, etc. I wonder how can anyone in their right senses are betting that the market will recover soon ? I see the DOW around 16,000 soon.
N
I feel it is my duty as a decent human to share my thoughts on SQQQ. I have made some good money, and lost some good money, with SQQQ based on timing/luck (some good with a lot bad). What I have learned is that win, lose or draw (99% of the time) you cannot hold this stock more than 1 to 3 days. To be frank, pardon my analogy if it sounds sexist, you must treat SQQQ like a “one-night stand” and take what you can get. There are only a few events that can occur of which will drive this stock up and they all require damn-near perfect timing and or luck and are usually short lived. 1.) Be in position when the FED is supposed to lower rates and they do not (or increase them instead). 2.) A swath of poor earnings with downward guidance from multiple tech giants can send it up. 3.) The elite fund managers/brokerage firms decide it is time to get out of tech.. 4.) An unpredicted geo-political event occurs. Outside of those four categories, especially during unprecedented federally infused/MELT-UP, pre-election, internet retail hoopla valuation mode-times, your best option is to sit and wait for one of those events to occur and then jump in for as much of the ride as you can get. You’re never going to get in at the very bottom and exit at the top. If you somehow get one or two days of gains, get the hell out of there and be thankful. You must trade this and not hold it. A handful will be very lucky in some cases, but most who have traded this stock know it is a losing proposition if you are planning on holding it for an extended period of time (i.e. more than 3 days). And during those three days you will probably still lose. Don’t forget that with this stock you are always one headline or tweet (“More stimulus approved,” “COVID vaccine approved,” “New China deal,” “FED to lower rates,” “New Tesla engine powered by fart gas!,” “Better than expected employment numbers,” etc.) away from losing more money. Good luck to you all.
m
This is change in psychology time in the market. Buy every pullback to... If you are long SQQQ and you see what we see yesterday and today, TAKE SOME PROFIT. Vol 2X, volatility way up, 11% move off bottom, some 20% moves could be coming...
C
Many thinking we are out of the woods and Market will go only up from here. But Nothing has changed fundamentally for this year from last week. Still I am bearish overall on the market.
1. Still we have supply chain issues 2. Still we have very high inflation 3. Still FED will be doing QT and pull the money from the market 4. Russia - Ukraine war has not ended yet 5. China Taiwan issues still in the cards 6. Omicron variant Deltacron still spiking. Even though less hospitalization, still restaurants and travel and cruise and retail gets affected 7. Mortgage interest is going up daily and causing pressure on new home sales
if you day trade and make profits on ups and downs that's fine. As I said before. But for long term investment, we are not out of the woods
Absolutely Nothing has changed from last week. Still we will have a recession end of year or next year. These market spikes are fake rallies that happen time to time during any downtrend market. It does not mean, market downtrend is over. For example: still warren buffet had not entered the market and in sidelines. Why? Do any of us know the market better than him?
Just my opinion. Trade safe. Good Luck!!!
F
Why was the FED purchasing securities to the tune of nearly 9 Triliion over the past few years. At the same time the market was going higher.
Now the real question is can the FED really raise interest rates (on 30 Trillion in national debt) to a point where they can curb inflation? I submit absolutely NO. The interest on our debt would go up significantly as the FED raises rates.
We are entering a death spiral. The FED has mortgaged our future with their free money and inability to see the obvious. Moreover, the FED has lost its objectivity and has become political. Nothing else can explain how they grossly miscalculated inflation and overbought the market via QE.
The market risks are enormous right now. The SQQQ is a great vehicle to potentially capitalize on our Governments drunkenness on spending helped by the Fed’s low interest rates.
Do your own homework and be generous!!!
L
This market since before COVID has been rocketing up like never before. The time has come for some air to be released. Maybe 10-20% over the next month or two. SQQQ is the only safe way to offset ones portfolio or go all in to short the market. I for one am taking substantial "Profits" off the table and adding to SQQQ. So far its been an excellent buy with much more expected over the next 60 days. YOU GUYS IN?
t
yep....bught 500 shares in April...when every analyst said that we will see a more downside to the market after a brief run-up. So after April, added more and then more in May and June. CNBC said that ok now....we just saw the biggest runup in history for the 3 month period...people missed out on the run-up should stay on the sideline because we will see 15% downside in summer.....OK......more upside and record highs... Man...I should've listened to President Trump. He knew exactly what he was talking about.....even back in March, he said that all 3 indexes will reach new highs....and no...it won't take years....new highs will be here in summer.....BOY.....he is right! The economy does not equal the market and you cannot fight the fed. If I had TQQQ...would've made 450%!! Apple was like $184!!! Anyhow, now in August....I will do everything opposite of what they say on TV
D
I’m about to get stopped out this morning ($24.67), it should have been a long time ago but logic kept telling me to hold firm - that this market can’t keep rising in the face of so many challenges. I’m starting to think that maybe it can. It’s been an extremely painful month and I can’t risk further losses, gotta live to fight another day even though I’m consumed by incredible disbelief. I’m hoping the sell off might start before I get stopped out but I’m not going to hold my breath.
m
Friday the first day that correction in tech felt ever possible. QQQ down not even 1% but the last 3 hours today was nothing but constant profit takng,and it felt quant driven. We are 9 point away from the 50 day moving average on QQQ and that could be here fast.
m
SQQQ will rise 20% next week and head back to $30 real quickly. We are about to enter into another shutdown and without a stimulus to support it. economists over the weekend said we are in real trouble. We are in a recession for sure. Dems will break up large tech firms. Easy money to be made here, just keep buying the stock.
D
I day trade this and tqqq. lately haven't touched tqqq much because it's a bear market. This ETF is a moneymaker in this economy. Not many investors out there know about inversed leveraged etfs. we aren't even close to the bottom.
m
Just to share what the Fed has released after 2 days meeting,
1. The fed raised its expectations for inflation this year to 3.4% but stated that inflation pressures are “transitory”. (Higher than expected but temporary)
2. the committee still sees inflation trending to its 2% goal over the long run
3. the central bank gave no indication as to when it will begin cutting back on its aggressive bond-buying program. (Expected)
4. Jerome Powell stated in the press conference that the economy was not yet at the point where tapering those purchases was appropriate.
5. Jerome also stated that the committee will continue to assess the economy’s progress toward our goals. As we have said, we will provide advance notice before announcing any decision to make changes to our purchases.
Overall, the fed sees that economy was not ready to change the current policy toward asset purchasing program although inflation expectations (3.4%) are higher than expected (Transitory).
The stock market is not a bubble.
Sure the Nasdaq Composite climbed 1.4% to 11939.67 on Tuesday, while the S&P 500 gained 0.8% to 3526.65, and the Dow Jones Industrial Average rose 215.61 points, or 0.8%, to 28645.66. The Dow has ticked up 0.4% year, while the S&P 500 has risen 9.2, and the Nasdaq has gained 33%. The ratio of the Nasdaq 100 to the S&P 500, meanwhile, is now highest on record.
But the stock market is not a bubble.
Zoom Video Communications (ZM) jumped 41% after reporting earnings that were more than twice what analysts had been expecting. It’s now worth $129.1 billion, more than International Business Machines’ (IBM) $109.9 billion. Zoom had sales of $663.5 million during its second quarter, while IBM had sales of $18.1 billion.
But the stock market is not a bubble.
The ratio of bulls to bears in the Investor Intelligence Sentiment Index, at 3.7, is higher than 3, the level that has led to selloffs in the past. Citigroup’s Panic/Euphoria index hit 1.13, almost three times 0.41, the level that signifies euphoria. The stock market has been down 100% of the time after reaching that level of euphoria.
But the stock market is not a bubble.
Apple (AAPL) stock gained another 4% on Tuesday, and has gained 157% over the past year; its sales have increased by 5.7% during that period. Tesla (TSLA) dropped 4.7% after announcing a $5 billion secondary offering, but is still up 953% during the past year. Its sales have increased by 3%. “[I] simply cannot believe how far the growth in their market caps have exceeded the growth of their overall business,” writes David Rosenberg of Rosenberg Research, referring to the “’Great Eight’ growth stocks of which Apple and Tesla are but two.
But the stock market is not a bubble.
There are perfectly good explanations for all these things. Low interest rates, quantitative easing, future growth, disruption, the coronavirus, and on and on and on. A bubble is not one of them.
Until it is.
Sun, December 12, 2021, 4:45 AM
SPX Daily Chart
Based on the comparison between the Percentage of stocks above 200-Day average and the SPX for the past 10 years, the divergence happened since Feb 2021 as the SPX continue to trend higher, the number of stocks participated in the uptrend is getting lesser, deteriorated from 90% to 42% as of last Friday since Feb 2021.
In fact, many growth stocks such as Affirm Holdings (AFRM), CrowdStrike Holdings (CRWD), Fiverr International (FVRR), MercadoLibre (MELI), Sea (SE), Twilio (TWLO), DocuSign (DOCU), Roku (ROKU), PayPal Holdings (PYPL), etc…experienced big drawdowns range from 32%-65% from their all time high.
There are only a handful of outperforming stocks like Apple (AAPL), Microsoft (MSFT), Lam Research (LRCX), Broadcom (AVGO), Qualcomm (QCOM), etc… supporting the S&P 500 index.
- ADVERTISEMENT -
The divergence between the SPX and the stock market breadth are certainly not a healthy sign for the bull market especially it has been persisting for nearly 10 months. It might only take a few early capitulations from the funds to trigger a broad market sell-off when the market is at the vulnerable point.
Grantham recently told Bloomberg that investors, who enthusiastically drove the stock market to new heights during a global recession, are in for a shock.
“When the decline comes, it will perhaps be bigger and better than anything previously in U.S. history,” he warned.
Grantham predicted the dotcom collapse and the 2008 meltdown of the real estate market — he’s also in charge of about $60 billion as the investment chief at asset management firm Grantham, Mayo, & Otterloo — so he’s worth listening to.
Also consider duration of trends. After the blowdown in March one would expect an uptrend to last quite a while (maybe now is long enough).
Also, if markets are very overstretched above moving averages, they are vulnerable and all they need is a trigger to implode. If they don't get a trigger they will cause max pain for any logical shorts.
IMHO its getting close to the time to buy SQQQ
So, not having that notable selloff in Sept/Oct and not having solid "reasons" for a continuation of the bulls I felt it prudent to take some off the table via SQQQ and lining up some of the other short etf's as I waited for my precious metal mining stocks to make a move next few months. Cheers!
Outside of those four categories, especially during unprecedented federally infused/MELT-UP, pre-election, internet retail hoopla valuation mode-times, your best option is to sit and wait for one of those events to occur and then jump in for as much of the ride as you can get. You’re never going to get in at the very bottom and exit at the top. If you somehow get one or two days of gains, get the hell out of there and be thankful. You must trade this and not hold it. A handful will be very lucky in some cases, but most who have traded this stock know it is a losing proposition if you are planning on holding it for an extended period of time (i.e. more than 3 days). And during those three days you will probably still lose.
Don’t forget that with this stock you are always one headline or tweet (“More stimulus approved,” “COVID vaccine approved,” “New China deal,” “FED to lower rates,” “New Tesla engine powered by fart gas!,” “Better than expected employment numbers,” etc.) away from losing more money.
Good luck to you all.
1. Still we have supply chain issues
2. Still we have very high inflation
3. Still FED will be doing QT and pull the money from the market
4. Russia - Ukraine war has not ended yet
5. China Taiwan issues still in the cards
6. Omicron variant Deltacron still spiking. Even though less hospitalization, still restaurants and travel and cruise and retail gets affected
7. Mortgage interest is going up daily and causing pressure on new home sales
if you day trade and make profits on ups and downs that's fine. As I said before. But for long term investment, we are not out of the woods
Absolutely Nothing has changed from last week. Still we will have a recession end of year or next year. These market spikes are fake rallies that happen time to time during any downtrend market. It does not mean, market downtrend is over. For example: still warren buffet had not entered the market and in sidelines. Why? Do any of us know the market better than him?
Just my opinion. Trade safe. Good Luck!!!
Now the real question is can the FED really raise interest rates (on 30 Trillion in national debt) to a point where they can curb inflation? I submit absolutely NO. The interest on our debt would go up significantly as the FED raises rates.
We are entering a death spiral. The FED has mortgaged our future with their free money and inability to see the obvious. Moreover, the FED has lost its objectivity and has become political. Nothing else can explain how they grossly miscalculated inflation and overbought the market via QE.
The market risks are enormous right now. The SQQQ is a great vehicle to potentially capitalize on our Governments drunkenness on spending helped by the Fed’s low interest rates.
Do your own homework and be generous!!!
YOU GUYS IN?
1. The fed raised its expectations for inflation this year to 3.4% but stated that inflation pressures are “transitory”. (Higher than expected but temporary)
2. the committee still sees inflation trending to its 2% goal over the long run
3. the central bank gave no indication as to when it will begin cutting back on its aggressive bond-buying program. (Expected)
4. Jerome Powell stated in the press conference that the economy was not yet at the point where tapering those purchases was appropriate.
5. Jerome also stated that the committee will continue to assess the economy’s progress toward our goals. As we have said, we will provide advance notice before announcing any decision to make changes to our purchases.
Overall, the fed sees that economy was not ready to change the current policy toward asset purchasing program although inflation expectations (3.4%) are higher than expected (Transitory).
Is this a good news for QQQ?