Popular technology stocks have recently staged a rebound. But segmented money flows show the rally is suspect.
Let’s examine the issue with the help of a chart.
Chart
Please click here for a chart showing money flows in 11 popular tech stocks. Due to the popularity of these stocks, it makes sense to look at them in addition to Dow Jones Industrial Average DJIA and broad-based ETFs such as S&P 500 ETF SPY, Nasdaq 100 ETF QQQ and small-cap ETF IWM. Please note the following:
• Momo (momentum) crowd money flows are extremely positive in the stock of AMD AMD and positive in Intel INTC.
• Momo crowd money flows are very positive in the stocks of Facebook FB, AAPL, Amazon AMZN and Netflix NFLX.
• Momo crowd money flows are positive in the stocks of Google GOOG, GOOGL, Microsoft MSFT, Nvidia NVDA, Alibaba BABA and Tesla TSLA.
• In addition to Intel, smart money flows are mildly positive in Facebook and Google.
• Smart money flows in Netflix stock are mildly negative.
• Smart money flows in other popular tech stocks are neutral.
The total of the foregoing is that this rally is mostly momentum-driven. The momo crowd buys simply because those stocks are going up.
Short squeezes
The chart shows that short squeeze money flows range from positive to extremely positive in 10 of the 11 popular tech stocks. The momo crowd buying has led to a short squeeze.
In a short squeeze, short sellers are either compelled or feel compelled to buy to cover stock. Buying to cover by short sellers is further exaggerating the moves up.
Short squeezes lead to a lot of artificial buying that is not based on fundamentals..Read more at MarketWatch.
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