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Following the recent U.S. presidential election, market analysts are observing a shift in trading patterns, characterized by a concentration in big-tech stocks and high-momentum trades. OJ Renick notes that the post-election trade is losing momentum, indicating excessive speculation in single-stock investments. Concurrently, market indicators suggest a weakening broader market, with the number of stocks above their 50-day and 200-day moving averages declining. The VIX index has increased by 6%, and the NYSE New Highs/New Lows has turned negative for two consecutive sessions. Analysts, including John Hardy, warn that these divergences between high-performing stocks and the broader market could signal impending volatility.
The US stock market is showing signs of near-term speculative excess, as traders and investors pile into the high momentum trades while the broader market is suffering. These kinds of divergences can precede ugly bouts of market volatility says @johnjhardy in this update…
Caution: The US stock market is out of balance. https://t.co/Xf0R1xded6 The big high momentum stuff is taking the market-cap weighted indices ever higher, but broader market is quite weak here - divergences getting ugly....
#LSTMarketUpdate Speculative baskets keep on being pushed to nose bleed levels while the number of stocks above their 50/200 is drifting down, the VIX is up 6% and the NYSE New Highs/New Lows turned negative for the second session in a row. The remaining pockets of strength… https://t.co/qfuowVqzX1