At the heart of the speculative activity are smaller investors, according to Sundial. Small trader call buying made up more than 50% of total volume last week, the highest since 2000, it said.
Past instances when bullish small trader positions made up 45% or more of volume preceded a median loss for U.S. stocks of about 3% in two months time and 15% in a year, according to the note.
“Small traders are pushing their luck in a major way,” said Goepfert. “It seems increasingly risky to try to chase this rally along with traders who have traditionally been extremely reliable contrary indicators.”
Regardless of any mitigating argument, chasing the rally has been the right decision. The major Wall Street indices blazed through potential areas of resistance in short order. The Nasdaq Composite is now at a new all-time high and the worst performing, most at risk of bankruptcy companies, have staged spectacular rallies. The determination of retail investors to ride the coattails of the Fed while institutional investors stepped aside is a clear example of speculative fervour.Click HERE to subscribe to Fuller Treacy Money Back to top