Hey, Ross here:
As the rally continues and bullish sentiment surges…
People are asking – is this the sign of a market top?
Let’s look at some evidence.
Chart of the Day
This chart shows the volume of call buying by retail investors in the top half…
And the volume of call selling in the bottom.
As you can see, retail call buying has not spiked to levels last seen during the 2021 “meme stock” era…
While retail call selling has plunged.
Some may look at this chart and say that retail investors are being way too exuberant…
And just like it was back in late 2021 – it’s a signal for the market top.
I can see why some people would look at it this way.
But here are the facts.
Earnings growth is at two-decade highs outside of major recoveries.
And most sectors are actually seeing valuation multiples contract – not increase.
The chart above shows three columns.
- The price return for each S&P sector
- The earnings growth for each S&P sector
- The valuation multiple for each S&P sector
And as you can see, while most sectors have seen solid price returns year-to-date…
Their earnings growth has been even higher than those returns…
With most valuation multiples contracting instead of expanding.
That’s why, even though anything can happen…
I’m highly skeptical of those who keep saying that this is “clearly” a market top.
Don’t take the surge in retail call buying as some sort of topping signal.
But as I explain below…
Call buying can be a powerful signal…
But NOT from retail investors.
I explain more below.
Insight of the Day
You want to look for “unusual” call buying – not retail call buying.
Most retail investors have no edge in trading stocks.
When it comes to options, they’re even worse.
Most are just buying call options on stocks they read about in the forums…
And crossing their fingers that it’ll go up.
Retail option trading is usually nothing but gambling usually.
What I like to pay attention to is a very specific kind of call buying…
What I call “unusual” call buying.
Because pinpointing this “unusual” call buying has led to stock wins like 87%… 542%… and 806% – all in a matter of weeks or evendays.
Especially during the rally following the tariff selloff last year.
I’m going to share more about that tomorrow morning (including a story that should make you hopping mad)…
So keep a look out for that.
In the meantime, have you heard about the “sleepy” $20 stock that could jump 50% overnight?
Customer Story of the Day
“Ross is a minefield of knowledge…
Really enjoying his live sessions – a lot of information to process being new enough to the game.
But I’m enjoying the teaching style as he breaks things down well and says it how it is – no fluff no messing about.
This man knows his onions recommend 10/10”
Ross Givens
Editor, Stock Surge Daily
