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Retail Investors Pour $1.5 Billion Each Day Into US Markets, The “Highest Amount Ever Recorded”

Retail Investors Pour $1.5 Billion Each Day Into US Markets, The "Highest Amount Ever Recorded"

For much of the waning days of 2022, the broader…

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8 months ago

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Retail Investors Pour $1.5 Billion Each Day Into US Markets, The "Highest Amount Ever Recorded"

For much of the waning days of 2022, the broader theme in markets was a downbeat one, especially for one group of habitual gamblers investors: after a stellar 2021 when nothing made sense and the junkiest of companies exploded higher steamrolling shorts, for retail investors 2022 felt like the polar opposite: a relentless series of gut punches which knocked the air out of basement dwelling daytraders and crushed some of the most popular retail names.

And indeed, a quick search of headlines from mid/late 2022 confirmed that the retail spirit had been broken:

It all culminated with the near record year-end liquidation when in addition to momentum, tax loss selling prompted retail investors to dump single stocks at an unprecedented pace as described Retail Investors Slamming The Bid Amid Tax-Loss Selling Capitulation

However, this record selling flow would not last long, and indeed, just one month later, we wrote that with LO institutions and hedge funds extending their bearish positioning, it was retail investors that picked up the BTFD torch in January, adding that "if retail is once again a more powerful price setter than institutions and hedge funds (thank you zero market liquidity), and we are facing another Jan 2021-type meltup, then watch out above even if none of the abovementioned technicals go into play."

In retrospect we were right, but not even we had any idea just how much we were right.

That's because according to the latest report from retail orderflow specialist Vanda Research, January was a blowout, record month for retail buyers in the market.

As Vanda's Mario Iachini writes, "in the last month, retail investors poured an average of $1.51bn/day into the US markets, the highest amount ever recorded." And as we expected, this group of investors "has continued driving US equity market swings since the second half of last year."

Echoing verbatim our own thoughts, Vanda writes that "with recent surveys showing the institutional investor community remaining broadly bearish on stocks, it would be unwise to underestimate the importance of the retail cohort" as so many bearish hedge funds learned the very hard way in early 2021. "That’s in keeping with retail sales and jobs data for January, suggesting that consumers retain impressive levels of buying power. While the jury is still out on whether that’s due to a robust job market or excess savings from pandemic stimulus, the bottom line is that investors should heed signals from the ‘unsophisticated money’ crowd."

Having said that, seasonality suggests that flows could abate somewhat in the weeks ahead as earnings season falls in the rear-view mirror and investors start preparing for Tax Day in mid-April. However, if broad equity markets continue to perform well, we may instead see flows shifting towards smaller, more speculative companies (this is already occurring to an extent). And while the same could take place in the options market, especially with the dominance of 0DTE option activity, Vanda does not anticipate a repeat of the 2020-21 bubble, given that we are still in the late stages of the economic cycle.

Finally, contrary to popular belief, retail money market funds' net assets at an all-time high suggest that retail investors still have plenty of capital to allocate to riskier investments, provided that market conditions remain supportive.

Vanda discusses this and other related topics in more detail below.

Total net purchases of US securities exceeded expectations by a significant margin on Wednesday. If we only consider periods when the S&P 500 closed in positive territory, Wednesday's aggregate purchases surpassed the previous record set on February 8th. Normally, Vanda would expect this this level of inflows on a day when the S&P 500 experiences a daily decline between -1% and -4%. Instead, "this type of behavior suggests retail traders are FOMO-ing more than any sentiment recent survey would show."

The flipside to the recent retail euphoria is that Vanda expects retail flows into cash equities to decrease in the weeks ahead, as seasonality suggests that March-April are typically middle-of-the-road months during the calendar year.

Furthermore, when looking at a rolling one-month period, inflows have never been higher since the dataset began in 2014 (second chart below). Sustaining such a robust daily pace will prove challenging but it won’t mean the end of the current bull market if institutional investors pick up the slack.

At the same time, and contrary to popular belief (especially among bears), the above doesn’t mean that retail investors are running out of capital to allocate to risky investments. Indeed, from a stock level perspective, the chart below suggests that retail investors have plenty of dry powder in the form of capital parked in money market funds that could be deployed in the equity space once confidence about future market returns increases more broadly.

Adding insult to injury for the institutional bears - of which there is plenty - there is potential for bullish positions to be added in the options market. However, it is uncertain to what extent retail investors are willing to participate in the rally with leverage, given they’re still sitting on significant losses (-25% on average). In any case, nobody expects that the level of speculation observed during the 2020-2021 period will be replicated as we’re still in the later stages of the market cycle. Those dynamics are more likely to take hold during the early recovery phases after a recession has occurred.

The soaring retail investor flows underpin the outperformance of their favorite stocks. A basket of the top 10 most-purchased retail stocks over recent months is experiencing a strong rebound relative to the SPX in 2023. Retail flows have accounted for a +US$18.5bn capital injection YTD in these names (listed below the chart). Should positive momentum in the broad equity market persist, it could push retail investors toward more speculative names, which are more susceptible to such flows given their smaller market cap.

Many smaller-cap single stocks are also beginning to populate the top part of the retail leaderboard so far in 2023. Indeed, the first table below shows that beyond the top 10 most-bought securities, there’s a host of smaller-cap names that have attracted significant inflows this year (~US$2.23bn in total). Moreover, the weighted average performance of this group of stocks is roughly +50%, which is widely outpacing the S&P500 total return of 8.2%.

The other outcome of this dynamic is a pick-up in retail purchases in the ARKK ETF and some of its underlying holdings. It was common back in 2020-21 for retail investors to buy ARK ETFs while at the same time piling in some of their more hyped underlyings. While we don’t expect retail speculation to reach those levels for the reasons discussed above, it is noteworthy that retail investors are vastly outpacing Cathie Wood and Co. regarding purchases across some of these names.

Vanda concludes its weekly retail tracking by pointing out that crypto TradFi proxies are among some of the best performers week-to-date.

Silvergate Capital (SI) shares were up 28.6% at the end of trading Wednesday after Citadel Securities announced that it had taken a stake in the company. Indeed, 13F filings show Citadel Securities bought 5.5% in the digital currency banking company. The shares are up 69% over the past month but remain 91% below their all-time high. With the latest data showing 67% of SI’s shares held short it is likely that retail purchases have helped fuel a short-squeeze over the last three trading days. Given the size of the short book, we wouldn’t be surprised to see retail traders attempt to push the stock further in the coming days, although flows over the past three months show that interest in this name tends to be sporadic and short-lived. In contrast, Coinbase (COIN) seems to enjoy stronger retail tailwinds as bullish activity in the options space is surging as well (second chart).

Finally, here is the aggregate retail flow tracker"

Tyler Durden Mon, 02/20/2023 - 23:30

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Pro-crypto lawmaker stays interim US House Speaker as frontrunner loses first round of voting

Ohio Representative Jim Jordan, the Republican Party’s nominee for Speaker, won the support of 200 of his colleagues in an Oct. 17 vote — below the 217…

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October 17, 2023

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Ohio Representative Jim Jordan, the Republican Party's nominee for Speaker, won the support of 200 of his colleagues in an Oct. 17 vote — below the 217 needed to hold the position.

North Carolina Representative Patrick McHenry, chair of the United States House Financial Services Committee and crypto proponent in Congress, is still temporarily in the third most powerful role in government after one of his Republican colleagues failed to secure enough votes.

In a vote conducted with members of the U.S. House of Representatives on Oct. 17, no candidate for Speaker won a majority of votes needed to secure the position. Ohio Representative Jim Jordan, the Republican Party's nominee for Speaker, obtained 200 votes — short of the 217 needed to win.

All 212 Democratic members of the House voted for Minority Leader Hakeem Jeffries, with other votes by Republican lawmakers going to Representatives Steve Scalise, Kevin McCarthy, Tom Emmer, Tom Cole, Thomas Massie and Mike Garcia, as well as former New York Rep. Lee Zeldin. According to House rules, a Speaker need not be a member of Congress.

Rep. McHenry, who has been serving as interim Speaker since Republican members voted to oust McCarthy on Oct. 4, currently lacks the authority to move legislation forward in the House, with the exception of the Speaker vote. For the first time in U.S. history, half of the legislative branch of the federal government was largely paralyzed, making it impossible to move forward with crypto-related bills.

Rep. Patrick McHenry addressing the U.S. House of Representatives on Oct. 17. Source

Many pro-crypto users on social media have called on lawmakers to make McHenry the next Speaker — an outcome which would also require nearly all Republicans in the House to unite behind one candidate. Behind U.S. President Joe Biden and Vice President Kamala Harris, the Speaker of the House is second in the country's presidential line of succession. However, some experts have reportedly said the line of succession does not apply to an interim Speaker like McHenry.

Related: US government among largest Bitcoin hodlers with over $5B in BTC: Report

At the time of publication, it was unclear when McHenry planned to call for a second vote. Many have criticized Jordan for repeating falsehoods surrounding the results of the 2020 presidential election in favor of former President Donald Trump, but he remains the leading candidate with a Republican majority in the House and Democrats united behind Jeffries.

McHenry led the House Financial Services Committee as lawmakers voted in favor of crypto bills including the Financial Innovation and Technology for the 21st Century Act, the Blockchain Regulatory Certainty Act, the Clarity for Payment Stablecoins Act and the Keep Your Coins Act. The pieces of legislation are expected to head to the House floor for a full vote, but the current situation with the Speaker makes that unlikely in the near future.

Magazine: Opinion: GOP crypto maxis almost as bad as Dems’ ‘anti-crypto army’

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General Motors loses ground to key electric vehicle rival

A major global automaker knocked GM out of the top 3 U.S. EV car companies last quarter.

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1 hour ago

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October 17, 2023

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General Motors’  (GM) - Get Free Report argues that United Auto Workers (UAW) should end their strike to avoid the risk that competitors outmaneuver it in the electric vehicles market.

Indeed, there's a lot at stake. Electric vehicles are increasingly displacing internal combustion engine (ICE) vehicles, and disrupting General Motors' plans could lead to lost market share, and, possibly, end its dominance as America’s top vehicle manufacturer.

The company is already under pressure from one key rival that overtook it last quarter, pushing it out of the top three U.S. EV car companies.

A logo is displayed on a Chevrolet Bolt EV that sits on the sales lot at Stewart Chevrolet on April 25 in Colma, Calif. (Photo by Justin Sullivan/Getty Images)

Justin Sullivan/Getty Images

The EV market is expanding

Consumers bought over 313,000 EVs in the third quarter, about 7.9% of all vehicles sold, according to Kelley Blue Book. Wall Street analysts expect EVs to account for 40% of passenger cars sold in America by 2030.

Related: Tesla’s EV throne is being chipped away at by this surprising luxury brand

So far, the U.S. EV market is dominated by Tesla  (TSLA) - Get Free Report. However, General Motors pioneered EVs when it launched the EV1 to target environmentally conscious buyers in the 1990s.

The EV1 wasn't a hit, but Tesla's cars have gone mainstream because of the car company's focus on luxury and performance — a strategy that has allowed it to successfully compete in the electric SUV market with its Model X and Model Y and win over buyers in the under-$40,000 family car market with the Model 3.

General Motors, Ford  (F) - Get Free Report, and Stellantis  (STLA) - Get Free Report, which owns Dodge and Chrysler, were surprised by Tesla’s success. As a result, they’ve spent billions playing catch up on projects that are only now bearing fruit.

For example, an electric version of Chevy’s top-selling Silverado pick-up truck is expected to roll off assembly lines soon. The same is true for an electric Chevy Blazer and Equinox. It also has plans to reboot the Chevy Bolt, one of the best-selling EVs of the past few years.

More Business of EVs:

General Motors' efforts can’t happen soon enough. It’s far from the only major automaker knee-deep in designing and launching new EVs. Dozens of new models are expected to launch in the coming year, clearing the way for an extensive reshuffling in market share.

We're already starting to see the impact. Total U.S. EV sales increased by 50% in Q3 from last year, and, of companies with more than 1,500 EVs sold last quarter, eight saw EV sales more than double from one year ago.

As a result, Tesla's market share slipped to 50% from 62%, and GM's market share across Cadillac, GMC, and Chevy EVs dipped to 6.4% from 7.3% last year.

General Motors slows while Hyundai sales surge

The growing availability of Hyundai's new EV lineup may be one reason General Motors lost ground in EVs last quarter.

Hyundai sold 11,665 Ioniq5 EVs last quarter, up 143% from Q3 2022. It also sold over 5,000 of its new Ioniq6 EVs, and nearly 2,900 Kona EVs, up 184% from last year.

Altogether, Hyundai sold 19,630 EVs in Q3, giving it a 6.3% market share, up from below 3% last year. Including its high-end luxury Genesis brand sales, the South Korean car company sold over 1,400 more EVs in the quarter than General Motors, pushing GM to fourth among EV manufacturers in the U.S. last quarter.

Hyundai's rapid rise in the EV market may continue if the auto strike impacts General Motors' EV production, reducing available inventories at dealers. If so, the gap between the two automakers could widen.

Sign up to see what stocks we're buying now (General Motors isn't one of them!)

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An Award Announcement With a Dash of Market Commentary

With words like "Schneider’s dedication to educating others about stocks is unparalleled," Traders World Fintech Awards honors me in the most amazing way…

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2 hours ago

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October 17, 2023

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With words like "Schneider's dedication to educating others about stocks is unparalleled," Traders World Fintech Awards honors me in the most amazing way possible.

I have always been a teacher, whether in Special Education, or on the floor of the NY Commodities Exchanges as a chartist to my fellow traders, or in the last two decades, with MarketGauge and our clients.

Financial literacy might be one of the most underrepresented curricula in the US, if not the world!

My Economic Modern Family was created to fill the gap between basically no financial literacy taught in schools and beyond, to how folks can learn about stocks and the markets in a fun, tangible, and incredibly accurate way.

In yesterday's Daily, we covered the Family and how there is no better time to look at the charts on a weekly timeframe.

Today, the Family shifted.

  • Small Caps (IWM) and Retail (XRT), a.k.a. Gramps and Granny, woke up while Sister Semiconductors (SMH) fell.
  • Transportation (IYT) tested the top end of the range we discussed, which is between 220–235.
  • For XRT, we can say the range to watch is 57–65.
  • Small Caps or IWM needs to hold 170 and clear overhead resistance at 180.
  • Biotech (IBB) has been stuck in time for the last four weeks. The best range to watch would be 120–125.
  • Prodigal Son Regional Banks (KRE), except for a couple of rallies and sell-offs, sits between 40–45.
  • Bitcoin, a new member of the Family, was featured over the weekend in our Daily. As it holds 28,000, we anticipate it can climb to $31,500.

And let's not forget commodities.

In my recent interview with Kitco, I warned, "Higher bond yields could already be taking their toll on the US economy, and weak economic growth and stubborn inflation continue to create a stagflationary environment, which would be bullish for gold."

In another recent Daily, we discussed DBA, the Agricultural ETF, and DBC, the commodity index ETF.

"Over 21.80, we would begin to think more bullish in agriculturals. DBC on the right, more oil and precious metals focused, also underperforms the SPY. That is surprising and supports a risk-on environment. Through 24.75 that picture changes."

Traders' World also wrote, "Her ability to connect with her students on a personal level, provide ongoing support, and foster a sense of community among her followers is remarkable."

And for that, I THANK YOU, my loyal readers! Because of you and your support, I won this incredible award!


This is for educational purposes only. Trading comes with risk.

If you find it difficult to execute the MarketGauge strategies or want to explore how we can do it for you, please email Ben Scheibe at Benny@MGAMLLC.com, our Head of Institutional Sales. Cell 612-518-2482.

For more detailed trading information about our blended models, tools, and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.


Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth.

Grow your wealth today and plant your money tree!

"I grew my money tree and so can you!" - Mish Schneider

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish and Dale Pinkert discuss the disconnect between news and markets-and how to best invest right now in this video from ForexAnalytix's pre-market show.

In this video from CMC Markets, Mish shares her short-term forecast for USD/JPY and popular commodity instruments ahead of the US PPI announcement and September's Fed meeting minutes, with recent dovish comments from Fed officials suggesting a potential shift in the committee's policies.

Mish joins Business First AM to discuss the market reaction to the war in Gaza in this video.

Mish discusses what's needed for a market bottom on the Financial Sense Newshour podcast with Jim Puplava.

Mish takes over as guest host for David Keller, CMT on the Monday, October 9 edition of StockCharts TV's The Final Bar, where she shares her thoughts in the daily Market Recap during a day of uncertain news.

To quote Al Mendez, "The smartest woman in Business Analysis @marketminute [Mish] impresses Charles with her "deep dive" to interpret the present Market direction." See Mish's appearance on Fox Business' Making Money with Charles Payne here!

Mish covers bonds, small caps, transports and commodities-dues for the next moves in this video from Yahoo! Finance.

In this video from Real Vision, Mish joins Maggie Lake to share what her framework suggests about junk bonds and investment-grade bonds, what she's watching in commodity markets, and how to structure a portfolio to navigate both bull and bear markets.

Mish was interviewed by Kitco News for the article "This Could Be the Last Gasp of the Bond Market Selloff, Which Will be Bullish for Gold Prices", available to read here.

Mish presents a warning in this appearance on BNN Bloomberg's Opening Bell -- before loading up seasonality trades or growth stocks, watch the "inside" sectors of the US economy.

Watch Mish and Nicole Petallides discuss how pros and cons working in tandem, plus why commodities are still a thing, in this video from Schwab.

Coming Up:

October 18: Crypto Town Hall X Spaces

October 19: Live Coaching

October 20: StockCharts TV's Your Daily Five

October 23: BNN Bloomberg

October 27: Live in-studio with Charles Payne, Fox Business

October 29-31: The Money Show

Weekly: Business First AM, CMC Markets

ETF Summary

  • S&P 500 (SPY): 440 resistance, 429 support.
  • Russell 2000 (IWM): 177 resistance, 170 KEY support.
  • Dow (DIA): 344 resistance, 332 support.
  • Nasdaq (QQQ): 368 pivotal.
  • Regional Banks (KRE): 39.80 -42.00 range.
  • Semiconductors (SMH): 150 pivotal.
  • Transportation (IYT): 237 resistance, 225 support.
  • Biotechnology (IBB): 120-125 range.
  • Retail (XRT): 57 key support if can climb over 61, better.


Mish Schneider

MarketGauge.com

Director of Trading Research and Education

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