As I scan headlines, some articles blame the Fed's recent statements, others a resurgence of Covid-19.

For example, Reuters reports "Dow slumps 5% on fears of spurt in virus infections, economic worries"

But if the Dow was going to dump $1500 on FOMC news, then it should have been  yesterday on news Fed Projects 2020 Growth at -6.5%, Unemployment 9.3%.

Covid? Really?

Covid-19 June 11, 2020

That hardly looks like shocking news.

Making Up Headlines 

Such articles make up headlines to fit the news, whether the headlines fit the news or not.

Panic Buying 

Here's an amusing headline The Nasdaq is exhibiting signs of panic-like buying--not selling--even as the stock market gets rocked Thursday.

The Nasdaq Arms Index, a volume-weighted breadth measure, fell to 0.389, while many on Wall Street see declines below 0.500 as suggesting panic buying. The Arms Index is calculated by dividing the ratio of the number of advancing stocks over decliners by the ratio of the volume of advancing stocks over declining volume. As the stock market rises, the Arms often falls below 1.000, as the buyers rush into advancing stocks. The current dynamic suggests that investors may continue to adhere to a trend of buying large-capitalization technology-related names that have helped the Nasdaq and the Nasdaq-100 index NDX, -3.46% outperform their peer indexes over the past several weeks. The number of stocks advancing on the Nasdaq on Thursday outnumbered decliners by nearly 15 to 1, while volume in advancing stocks represented 98.93% of total volume on the Nasdaq.

Casino or Stock Market

To understand today's selloff one has to look at the past 3 weeks.

Note that Retail Buying Frenzy Goes Wild.

“In my 20 years of experience I’ve never seen retail traders push stocks around like they’re doing right now,” said Dennis Dick, a trader with Bright Trading LLC. “When the retail rush comes into something, it can really move.”

At least three London-based traders said the surge was down to “Robinhood” traders - Robinhood is a popular stock trading app that greets visitors to its website with the motto “It’s Time to Do Money.”

Robinhood’s website said at noon on Wednesday 9,417 of its users owned FANGDD, up from 4,002 shortly after the market opened. By midday the stock was down around 50%. A Robinhood spokeswoman was not immediately available for comment.

“This is what you get when the markets are powering ahead and investors will latch onto anything that has a name that linking to tech stocks,” said Jawaid Afsar, a trader at Securequity Ltd.

The moves in FANGDD are reminiscent of recent years in which punters chased any company with “cannabis” or “blockchain” in its name. The chaotic trading in FANGDD wasn’t a one-off.

Last week, a similar euphoria was seen in bankrupt or soon-to-be-bankrupt stocks with Hertz (HTZ.N), Chesapeake (CHK.N), Whiting (WLL.N) and JC Penney rising 300% to 500% before pulling back a bit, leaving seasoned traders scratching their heads.

Individuals Roll the Dice on Stocks as Veterans Fret

Similarly, the Wall Street Journal reports Individuals Roll the Dice on Stocks as Veterans Fret.

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Options Traders Pile In

On June 8, Bloomberg reported Speculative Fervor in U.S. Stocks Surges to ‘Stunning’ Levels.

Traders established fresh bullish positions last week by buying 35.6 million new call options on equities, according to Sundial founder Jason Goepfert. That’s up from a peak of 28.7 million in February, when speculative activity was rampant, he wrote in a note Monday.

“Options traders make stunning bets on rising prices,” Goepfert wrote. “This kind of activity has a strong tendency to lead to negative returns in the S&P 500 and other indexes over a multi-week to multi-month time frame.”

Blazing Sentiment 

“It took me a while to figure out that the stock market isn’t connected to the economy,” he said. “I tell people there are two rules to investing: Stocks only go up, and if you have any problems, see rule No. 1.”

Portnoy is a sports gambler turned to daytrading the market. He has a live feed to himself trading stocks. 

"All I do is make money. this game is so f***ing easy"

I Should Be Up A Billion Dollars Right Now

I'm the Captain Now!

Hold On to Your Nuts

That's what's been going on for weeks.

And millennials hopped onto the bandwagon, trading shares  with no commission. 

Blame the Fed?

Yes, blame the Fed, but today has nothing to do with it. Nor does yesterday. 

The Fed is a serial asset bubble blower with huge long-term consequences. Don't blame day-to-day things for bubbles the Fed fostered for decades.

A lot of people will be burnt buying bankrupt companies and other companies that will take years to get back to these levels once a crash that sticks happens, and it will.

Mish

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