A Tale of Two Demographics
Older folks have lived through rough markets and don't want to do it again. Younger folks haven't seen that kind of carnage and remain optimistic.
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When we discussed the AAII survey over the last two weeks, I said it was an outlier. I said it was a bunch of old people. Yet the crowds all screamed at me and said this is soooo bullish. But it hasn’t been, has it?
I really do think when it comes to this particular survey, it is old people. Bear with me here. Older folks have lived through the 1987 Crash. They have lived through the Dot-Com Bubble bursting, and they have lived through the 2007-08 housing bubble and subsequent market collapse. It makes sense they don’t want to live through another downturn at this point in their lives.
But my sense has been that those folks under, say, 50-ish are much more optimistic about the overall market. They love tech stocks. They love Bitcoin. They are still embracing new technologies. They are where the Baby Boomers were during the Dot-Com era.
So, we have had a bifurcation in sentiment across the age demographic. But the last few days have seen the younger folks with a slight change of heart. When the group of stocks you are most invested in goes down by double-digit percentages, naturally, you rein in your bullishness.
That’s why I think we have seen the put/call ratio over .90 for two straight days. It’s not extreme by any stretch, but it is a change. That’s why the ISE Equity call/put ratio is now the lowest since the early days of September. Those options folks are getting a bit nervous. Maybe those zero-day call options aren’t working anymore.
I can even cite the CNN Fear and Greed Index being at Extreme Fear now as a change of heart. But the biggest change I see is the selling. I have discussed the speculation in Nasdaq names for months now. I have talked about the rise in volume and the penny stocks and the crypto garbage. I have noted that net volume (up minus down) has been a string of endless positive readings.
The last four trading days have seen net volume on Nasdaq red. That is the longest streak in almost a year. That’s right; it has been since March of last year this incessant desire for buying the dip. But that changed four days ago.
The Nasdaq McClellan Summation Index turned south a few weeks ago. That’s the blue line. It continues to head south. Yet the selling over the last four trading days has gotten it to the point where this indicator now needs net volume of +9.6 billion shares to halt the slide.
Nasdaq has been trading approximately 7-8 billion shares a day in recent weeks so that means to turn this from down to up would require at least two massive up days. That means it’s a little bit short term oversold.
Let me note I don’t have any of my other indicators that show an oversold condition like this. My estimation is that will take about another week. But if you are looking for some good news in this growth stock carnage, then I can tell you that I think the HODLERS have been doing a little less HODLing and more SELLing. Nothing panicky but selling all the same.
