Daily gains of 5%-10% on mega-caps as if they are penny stocks? The price action for August of 2020 has been positively bonkers.
For instance, Tesla (TSLA) witnessed 60% month-over-month gains. 60% in August alone! Even the 17th century’s ‘Tulip Mania’ may have made more sense than Tesla stock does.
Apple (AAPL)? The largest company in the world managed to bulk up by nearly 25% in a span of 30 days.
Those who have chosen to rationalize the price movement bring up ‘stock splits’ for AAPL and TSLA. Yet the most casual glance at historical data on stock splits show limited price appreciation based upon the mathematical sleight of hand.
Call it what it is: Panic Buying. And panicky buyers continue to inflate 2020’s greed-filled stock balloon.
On the flip side, some folks may want to take note of an unusual phenomenon. Specifically, the CBOE VIX Volatility Index (VIX), also known as ‘the fear gauge,’ rose alongside the S&P 500’s record run in August.
This desire for downside protection via the VIX is rare near all-time market highs. In fact, you would have to revisit the top of 2000’s tech bubble (March 2000) to identify a similar pattern of record stock peaks and higher VIX pricing.
The Nasdaq is even nuttier. 9% above an upper Bollinger band? 14% above a monthly 5-EMA?
Perhaps the conditions for a collapse are here. Perhaps not. Either way, a correction from ridiculously overbought technical levels appears to be baked into the September cake.