These days everyone refers to the speculative stocks that ramp a gazillion percent a day as meme stocks. I don't even know where that came from, but it has now become part of the lexicon. It got me thinking that way back in the late '80s, we had stocks move like this -- OK, not this much -- but we had stocks fly upward like flag poles as they are today. And I know we didn't call them meme stocks.
The reason those stocks were on the run back then was the rumor mill. Greenmail was how it all started, where a big investor (what we now might call a whale, back then we called them corporate raider) accumulated enough shares to force the company into making some corporate moves. Perhaps it was for a board seat or to reorganize their business. More often it was to buy their own stock back at higher prices. Back then, we called them '"story" stocks.
And folks would speculate on what might be the next story stock. The rumor mill was always among a similar type of raider names: Carl Icahn, T. Boone Pickens, and Sir James Goldsmith. I realize what we have now is a twist on that theme, but in general it is just another form of speculation run amok.
In the meantime, the big-cap indexes continue along their choppy sideways path, but breadth is strong as it has been since we got oversold in late May. Oh sure, much of the good breadth is not in the big-cap stocks (if it were, the big-cap indexes would move, wouldn't they?) it is the small-cap names. But it is the best breadth we have seen since January/February.
That means the McClellan Summation Index continues to rise. At some point we'll see it falter but for now it has been doing much better than the S&P.
What surprised me most about Tuesday's action was bonds had a big day and the stocks that typically rally with bonds didn't have such a fine day. We need to keep our eyes on this divergence. What also surprised me is how quiet the "higher rates" crowd has gotten. The Daily Sentiment Index (DSI) for bonds is at 70, so it's still neutral, but if bonds go up much more I expect to see the DSI get moving to the upside, as well.
On the sentiment front the put/call ratio was low for the second straight day. I expect we will see the 10-day moving average bottom and turn upward perhaps late this week, but early next week seems in the cards. Just look at how it has come down so handily from that peak, similar to the way it did so in November.
Soon we get to see the first sentiment readings for the week. We'll see if any have moved from high to giddy. In the meantime the chop and sideways action continues.
