From the desk of Willie Delwiche.
Key Takeaway: Sentiment is teetering on the edge of a complete unwind. Six months of choppy markets has taken its toll on optimism and now pessimism is starting to move higher. This week’s II data could just be a shot across the bow in terms of a more cautious stance from investors, especially if the struggles seen beneath the surface make their way to the S&P 500 and NASDAQ Composite. Volatility has started to pick up but there is plenty of room for price weakness to prompt fear and re-positioning on the part of investors. For stocks, the weakest part of the sentiment curve is after optimism peaks and as pessimism becomes more widespread.
NASDAQ daily trading volume more than tripled from late 2019 to early 2021. Since then it has fallen by 35%. The year-over-year change peaked in February of this year (+170%) but is now flat. The majority of the new closing highs (24 of 36) for the NASDAQ this year have come after trading activity peaked as momentum carried prices higher for a time even as risk appetite has waned.