Traders are not insanely bullish... yet
Sure, there’s some froth. But overall things are not too nuts.
People are declaring the return of meme stock insanity.
Bloomberg for one, is out with a piece this morning saying “the retail investing crowd is back in the throes of a meme stock mania.”
Exhibit A is the surging price of Trump Media & Technology Group, which debuted yesterday with a more than 40% pop, before slumping into the close. (It’s up big today too. )
Also also Reddit, soared, in its trading debut this week, marking the most successful social media IPO since Pinterest back in 2019.
And sure, the stock market is certainly not depressed. Why would it be?
Semaphore out of the Fed suggests it’s on track to deliver rate cuts this year. Analysts are ratcheting higher their expectations for corporate profits. And people are feeling pretty good about their own personal financial position—even if their outlook on the overall economy is sour.
I’d just point out that things are still a long way from the levels of euphoria that we saw back during the peak of the GameStop mishegoss back in January 2021.
Just check out the CBOE put-call ratio:
A product of the options market, the put-call ratio basically shows the balance between options market bets on stocks going up — calls — versus bets on stocks going down, known as puts.
The TL;DR is that the lower the number is, the more overwhelmingly bullish options market sentiment has become.
We've seen how low the ratio can go, and you can see, we’re nowhere near the level of nuts that we saw back in 2021.
It’s just one number. But it doesn’t suggest we’re at extremely elevated, or worrisome levels, of bullishness. On the other hand, things can always get crazier.
