Quantum Fizz Goes Flat as Speculative Fever Breaks
Quantum stocks, once the hottest thing since AI, are leading the pop that's taken the air out of the speculative bubble. Will bonds catch a bid before they get to 5%?
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Note: Since Thursday is an unscheduled market holiday, my next column will be Monday morning.
With all the excitement over the excessive volume traded on Nasdaq Tuesday I should have also revisited my complaining, not only with the crypto garbage but with that nonsense with Quantum stocks. You do recall my ranting about QUBT a month ago, don’t you?
As you can see, that stock has just about completed a round trip, so we can now say the speculative fever has broken there. Maybe quantum computing will turn out to be the greatest thing since AI, but my experience is that it won’t come from some stock that used to be a beverage company.
The air did come out of some of that speculative bubble in Wednesday’s trading though. You see Nasdaq had its first negative volume day in eleven trading days. Upside volume was a mere 30% of total volume (which was nearly five billion shares fewer than the day prior) which is the worst day for Nasdaq’s volume since the early September rout.
While that type of reading might be excessive for a day–Nasdaq was down a mere ten points–it is what needs to happen to correct the excesses that have built up over the last few months.
Speaking of the last few months, have you noticed that the S&P is trading pretty much where it did the day after the election. Let that be yet another reminder that this is not like the 2016 or the 2020 election but I suspect by now you know that.
So, is that a head and shoulders top in the S&P? It sure looks like it. That’s what the bears will see. The bulls will see a market that has gone sideways. So unless or until we see the S&P break that 5850 area we don’t know based on the pattern alone.
What we do know is that this week has seen breadth clock in on the red side all three days. Recall that as we fill in negative breadth readings on that table we can start to imagine an oversold reading heading our way. Remember the exact day is not the important part, it’s the general time frame and how we get there. Here is the updated table and the accompanying Oscillator charts.
While Wednesday was just more chop—the S&P has been in a range of 5900-6100 for two months now. Imagine a stock that trades 59-61 for months—it’s like watching paint dry! The bonds got some attention.
It began with not one, not two, but three articles on Bloomberg talking about rates going to 5% and how many were positioned for it either via options or futures. Then CNBC finally decided that almost every guest had to be asked about rates, something we haven’t seen before.
Is that hysteria? Not really but it did feel like a Realization Day. As a reminder, I consider that when we have had a trend in place and folks sort of shrug at said trend and then one day they decide that wait a minute, this trend is important. Wednesday had a bit of that feel, like all of a sudden folks realized rates were important. The DSI remains at 10.
I don’t know if this is the low, but it is starting to feel like this is the area. Maybe the Employment number will provide hysteria. It’s just starting to feel awfully late for this rate move.
After all, the homebuilders and the REITs have shrugged it away for weeks now.
