Bro, Do You Even Pick Stocks?
Because if you're just buying the Mag 7 and following what others do, you'd be better off with an index fund.
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I heard one narrative yesterday that made me want to scream. So naturally, I want to share it with you. Over and over again, I heard guests on television say, when energy came up, that it was ‘only three percent of the S&P.’
Isn’t our job to find stocks to make money in? If you are trying to match the S&P, then just buy the index. But if you can make money trading the energy stocks, who cares that they are only three percent of the index? Oh, I know the issue is that their market caps are not big and juicy like the Mag 7.
Wait, there’s more.
As I noted the other day, the market has become infatuated with small AI stocks, nuclear stocks, and space stocks. I don’t see any of these same people complaining that energy is only three percent of the S&P, complaining that the hot money is flocking to rocket stocks. I heard one guy interviewed, and he was talking about what the company was going to do on Mars.
Did anyone even push back and say, hey, we haven’t even gotten to Mars yet, let alone think about what we’ll do when we get there? But no, let’s surely not own energy stocks because they are only three percent of the S&P.
Then there is quantum computing which is hot right now because the CEO of Nvidia NVDA, who in January thought they were decades away from mattering now thinks they are just hunky dory.
Did you see Quantum Computing QUBT—the stock, not the industry—on Wednesday? The stock traded 131 million shares on the day. Not bad, right? Until you see that it has 140 million shares outstanding. The stock traded its entire float in one day. But sure, let’s dismiss energy because it is only three percent of the S&P!
And I haven’t even gotten to the penny stocks yet! Oh yes, the penny traders are back. You can almost always tell when they return because you will see total volume on Nasdaq goose up over 9 or 10 billion shares. Wednesday saw three stocks account for approximately 3.5 billion shares traded on Nasdaq (it was similar the day before). That’s about one-third of the total volume traded there.
As for the market as a whole, the reversal did not deter the options traders as the put/call ratio was .78, the lowest since May 29th. I see plenty of signs of speculation, but it is not showing up in the surveys. The Investors Intelligence bulls and bears refuse to budge.
Maybe because they see that the banks have stalled. Maybe because the IWM stopped right at 215 (the resistance I have highlighted several times in the last month or so). Maybe because they see the Mid-Caps can’t even get over the May high. Or that the Transports are also under the May high.
There is plenty of speculation in the market, just not in the usual places.
