Wall Street is as Sleepy as 2006

By Michael Salvatore

Listen to this post

An epic summertime lull for Wall Street… What Jason Bodner is seeing in the Big Money… Where bitcoin is set to go for the second half of this year… Why the hyped-up “triple witching day” is/is not a big moment for markets… The coming “AI mania” that will rival the dot-com bubble…

If we were to take the average measure of Wall Street activity each year, the bottom was probably this past week.

Just take a look at the chart below. Even as we climb to record highs in the stock market, the measure of volume – or activity in the market – is at one of its lowest levels in years.

By taking a 20-day moving average of volume on the SPDR S&P 500 ETF (SPY), we can see that the current volume average of around 46.5 million shares is unusually low. And this is the most widely traded ETF in the world:

Image

We haven’t seen such little activity since November 2019. Prior to that, you have to go all the way back to 2006 to find a 20-day moving average of volume this low. That’s because, back then, it was more common for volume to be below this level than above it.

This reads significant to me. There is so little activity in the market, it’s as if we’re back in the era when electronic trading via the internet wasn’t quite commonplace… and the innovations that enabled retail investors to become the force to be reckoned with hadn’t happened.

Wall Street isn’t just asleep at the wheel. It’s put a brick on the accelerator and is taking a nap in the back seat.

It’s hard to say what exactly this means. The last time volume was this low, in 2019, stocks were still firmly in bull mode and would be for three more months… until the pandemic crash. The last time we could consider this “unusual,” back in January 2006, stocks would have a full 22 months of the bull market rising over 24% before topping out in October 2007:

Image

That’s not to say that such low volume guarantees a top and a bear market. And to be clear, volume tends to slow down in the summer. But not to this extent.

❖ Jason Bodner’s been seeing it in the Big Money, too…

Jason’s specialty, as he shares with his readers in TradeSmith Investment Report and Quantum Edge Pro, is on major institutional Wall Street players. His entire investment philosophy is about watching them like a hawk… and following their well-informed, highly connected moves to growth stock riches.

Doing this well means keeping a finger on the pulse of exactly what the Big Money is up to. And he’s devised a system to do just that.

Each week, Jason measures the number of likely Big Money buy and sell signals in the market, based on order flow. Here’s what he had to say to his subscribers about the extremely low volume this past week:

Even with Wednesday’s buying, the Big Money Index (BMI) dipped to 50.9 from 58.4 the prior week. If that surprises you, it’s not because of dramatically increased selling but more because of less buying. In fact, selling continues to lighten as well.

Image

Source: MAPsignals.com

This means things could go either way in the short term. Stocks could pause and charge higher, or they could reverse lower. That’s in keeping with historical patterns, as June is mixed. July is usually a good month for stocks, followed by a weak stretch in August and September and then typically a great fourth quarter.

Image

Data: 1990 through 2023 from FactSet

Jason’s perspective as a former Wall Street dealmaker is highly valuable here. While overall volume in the stock market is low, along with Big Money activity, we’re also not seeing a big tilt toward selling, which would be a warning sign.

As for what this means, here’s Jason once more:

I pay special heed to the fundamental rankings. We want sectors with growing sales, earnings, and profits. The strongest sectors fundamentally are Tech, Industrials, Energy, and Discretionary. That’s good news.

Image

The consistent theme right now in pretty much all sectors is less activity. Buying and selling are both waning.

The long-term outlook is highly bullish, but we can expect some typical summer volatility in the more immediate future. That means watching our current stocks, possibly taking some profits, and definitely continuing to find the strongest stocks with the highest likelihood of making us money.

And finally, let’s take a look at Jason’s latest Quantum Edge Hotlist… looking a lot like it did last week.

Image

Tech is, unsurprisingly, the dominant force at the top of the list with computer hardware and semiconductor companies like Nvidia, Pure Storage, Cirrus Logic, and KLA Corporation among the top-ranked. Some repeat names like Vital Farms and WisdomTree are also noteworthy.

At the bottom of the list, we’re seeing the continued presence of biotech companies, insurers, and commodity chemical firms, along with Beyond (BYON) – the company formerly known as Overstock.com.

Jason’s subscribers get access to this list every Monday afternoon, highlighting the latest Big Money buy and sell signals, along with a broader market and portfolio overview – part of which I showed you above.

If you’d like to join them to get first access to these names, along with Jason’s curated model portfolio, go here for more info on a Quantum Edge Pro subscription.

❖ Traditional markets aren’t the only place seeing a lull…

If you follow crypto, you’ve probably noticed that price action has been anemic in the sector. Even though bitcoin is up more than 50% in 2024, outpacing the stock market’s return, it’s been struggling to hang on to bullish momentum and set new highs along with stocks.

On Wednesday, we pointed out that bitcoin was at the bottom edge of a triangle pattern and threatening to break down. The situation hasn’t changed much:

Image

If you’re bullish on bitcoin here, you’re buying at some of the best prices since May. But is it a good bet for the second half of the year?

Bitcoin has a short history as a financial asset, but it has exhibited some consistency in that time. Every year since 2012, the average bitcoin return from right about now through the start of the next year has been about 130% – that’s counting both up and down years.

And in post-halving years like we’re in now – years where the supply of bitcoin received by miners falls in half, making bitcoin more scarce – the returns were even better. In the three post-halving years bitcoin has had since inception (2013, 2016, and 2020), the average return was 313%.

 Entry  Entry Price  Exit  Exit Price  %Gain 
6/22/2013$108.201/4/2014$806.50645%
6/23/2014$609.651/4/2015$281.99-54%
6/22/2015$244.661/3/2016$435.4078%
6/21/2016$706.471/2/2017$992.9641%
6/22/2017$2,643.331/3/2018$14,781.52459%
6/22/2018$6,719.011/3/2019$3,890.80-42%
6/22/2019$10,235.591/3/2020$6,945.02-32%
6/21/2020$9,355.741/4/2021$33,082.84254%
6/22/2021$31,609.821/3/2022$47,299.0650%
6/22/2022$20,699.631/3/2023$16,666.86-19%
6/22/2023$29,999.851/3/2024$44,972.8150%
6/20/2024$65,845.701/3/2025??????
   Average Return130%
   Post-halving Return313%


Bitcoin’s price action may feel like a bad bet right now, but history says these prices are a gift. And more broadly, this second-half performance lines up with our call earlier this year that stocks should accelerate as we near the election and year-end.

❖ Last week’s triple witching was a headline tour de force…

Every few months, you probably see headlines like this pop up:

Image

A “triple witching” occurs on the third Friday of March, June, September, and December. Those are the uncommon (but consistent) times when index, single stock, and ETF options are all set to expire on the same day.

With so much option expiry happening at once, the theory goes that Triple Witching Days tend to ignite a flurry of trading activity – raising volatility and therefore sending stock prices lower.

There’s a fourth element as well: index rebalancing. The sector indices offered by S&P Dow Jones are set to undergo weighting changes then, too, which means some stocks in the index will see selling pressure and others will see buying pressure.

These unusual events are said to create volatility. But just how significant is that volatility?

In the long run… not very. These events are highlighted as “days” for a reason. You tend to see any surges of volatility be short-lived. Just take a look at this chart of the CBOE Volatility Index (VIX) going back to 2023, with all the past Triple Witching Days marked by vertical dashed lines.

Image

With volumes low and the VIX ticking up this past week, we may see a surge in selling pressure through this week. But I would see it as more of a cooling off for a red-hot market, especially one that’s at odds with continued low volume, than anything resembling a sustained downswing.

Remember, the long arc of history shows that markets predominantly rise higher. You don’t want to get caught up in fear-driven narratives designed to shake you out. Stay the course, buy great stocks, and time will reward you.

❖ In the meantime, how about a mania set to rival the dot-com bubble?

I’m keeping a close eye on Louis Navellier of Breakthrough Stocksas I mentioned on Saturday.

Louis has been a successful growth investor for 47 years – no small feat when you think back to the moments of mayhem that those stocks had to survive: the dot-com bust…the financial crisis of 2008…the COVID chaos of 2020-2021…

In fact, many growth stocks did not survive them.

But Amazon sure did. Netflix. Ulta Beauty. Broadcom. And Louis recommended them all before they climbed 8,151%, 7,749%, 2,179%, and 2,113%, respectively.

Now, Louis feels the dot-com mania is repeating …with a twist most people will never see coming.

He intends to show hard evidence of this tomorrow from a stock-picking system that has spotted almost every boom of the last decade – from gene sequencing to electric vehicles, energy, and more.

Louis will explain why this could be the last financial mania of this scale for the next 25 years…

And how it could lead to the rise of a “New America” that’ll be almost unrecognizable to anyone from his generation.

Even if you’re skeptical, I think you’d better see for yourself how this works before deciding whether or not to invest with this mania in mind.

Louis’ presentation on the subject is completely free. And, to thank you for your time, he’ll give you two stock recommendations to get you started. Click here to reserve your spot for the briefing on Tuesday, June 25.

To your health and wealth,

Michael Salvatore
Editor, TradeSmith