Predators and Prey

The chart, below, has been making the rounds on social media of late. I saw Don Johnson (@DonMiami3), an economist, tweet it out previously. 

As you can see, retail investors were galvanized by the selloff at the beginning of the month and, instead of feeling fear or panic, saw dollar signs instead and bought stocks hand over fist. While that trade largely worked out well so far, as you know I often like to look at the bigger picture. 

And when we do, as noted with Members of late, I see the inverse of February/March 2009. 

Back then, in the winter of 2009, we had been in an unforgiving, seemingly endless bear market. It is easy to forget just how many classic bottoming signs the market ignored back then, which is the inverse of the classical topping signs the market has ignored up until now. In 2008/2009 we had rates cut to zero, endless bailouts, the announcement of QE, Warren Buffett writing an Op/Ed screaming to buy stocks, a new Treasury Secretary, etc.. None of it seemed to work as we only dove lower into early-March 2009. 

At the time, especially in February, I vividly remember hearing rumblings that retail was totally capitulating while institutions were finally gobbling up bargains. It did not seem accurate at the time as the market kept sinking day after day throughout most of February into the first few days of March. But once the turn came, it was over for bears. 

This time around, retail has been conditioned that any news is good news and that Powell, Yellen, and the powers that be simply will not "let" stocks fall. I disagree with the view that this time is different.

Thus, the notable increase in retail buys this month smacks of a final institutional-to-retail dump before a large pullback ensues. 

NVDA earnings this week will likely be the main event, and I still maintain that stock is ripe for a surprise move lower if this is the quarter the market finally sees even a slight slowdown in the rate of growth. Also, once again, Microsoft's lagging seems like an issue all-too-easily overlooked by bulls.

Finally, oil is surging today despite oil stocks not nearly as jubilant. A spike in oil from here on out is not what bulls want to see into an economic slowdown.