Since mid-June, the market’s remarks have changed from “inflation peaking” to “the Fed is about to turn” to “bad news is good news”, US bond yields have plummeted, and US stocks are still soaring in the shadow of a recession. The Daq Composite rose 20%. Why is this?
It can be seen that the flow of funds from retail investors has been the main driver of the US stock market rally over the past few days, with total buying consistently above the year-to-date average, averaging $1.36 billion over the past five days , while their interest has been concentrated. On classic tech stocks like Tesla, Nvidia, Apple, AMD, and Amazon.
In addition, Goldman noted that they are again seeing outsized call option purchases, to the extent that they were close to levels seen during the 2021 retail boom.
Susquehanna International Group also stated:
“There are signs that call volume has surpassed put volume in the first hour of the day to levels not seen since the last retail (short squeeze) institutional war.”
However, foreign media reported that as the Dow recorded its best month since the 2020 election, corporate insiders continued to sell stocks at a faster pace. These insiders sold 2.3 times more than they bought, the highest level since January, data compiled by the Washington Service showed .
For years, insider trading has been a bellwether of where the market is headed. Jim Paulsen, chief investment strategist at Leuthold Group, said:
“In general, it does puzzle me that no insiders have bought into their stocks during the rally from their lows. It’s not a deal breaker, but their actions are important to market confidence. That’s one of the things you have to pay attention to.”
Kim Forrest, chief investment officer at Bokeh Capital Partners, said:
“There’s a lot of things to worry about right now, so insiders might say we’re underweight some stocks first given how good the stock market was in July.”