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U.S. Stocks: Here’s Evidence of a “Nearly Unprecedented Acceptance of Risk”

Penny stocks fever has reached “the highest level since the first three months of 2000”

by Bob Stokes
Updated: March 18, 2021

Penny stocks tend to be highly illiquid. In other words, it's difficult to buy and sell them at favorable prices.

Even so, the lure of low-priced shares is hard for many market participants to resist, especially the novices -- like in 2000, when penny stock trading had reached a fever pitch.

Well, just about the same thing has been going on this year. Here's a Jan. 20 Reuters headline:

Analysis: A 'buy' is just a tap away: stock market dabblers drive trading boom into 2021

Our March Elliott Wave Financial Forecast offered its perspective with this chart and commentary:

PenniesfromHeaven

Total Penny Stock Dollar Volume hit $72 billion in January, the highest level since the first three months of 2000, when the dot-com mania peaked. Other than those three months, when penny-stock dollar volume averaged a whopping $155 billion, the value of shares traded in January 2021 was the highest. This suggests a nearly unprecedented acceptance of risk... This chart shows the average daily trading volume in penny stocks.

In a Feb. 16 Bloomberg article headlined "Penny Stock Craze at Boiling Point...," a portfolio manager is quoted:

"It is very markedly similar to what we saw in 1999 with these day traders and novice investors coming in and treating the market as a get-rich-quick type of scheme, and of course that didn't end too well 20 years ago."

Indeed, Elliott wave analysis is revealing a lot about what's ahead for the stock market here in 2021.

As the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, says:

[T]he Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress.

Every market participant -- whether novice or professional -- should know the Wave Principle's current market message.

Suffice it to say: it appears historic.

Follow the link below and you're on your way to getting the market insights you need.

Knowing the Dow Industrials’ "Wave Count" is Crucial: Here's Why:

That knowledge helps you anticipate big price moves in the direction of the main trend.

And -- just as important -- you won't be fooled by countertrend moves.

Remember, the stock market's price pattern unfolds simultaneously at all degrees of trend. Meaning -- hourly trends are part of daily trends, and in turn, these comprise the weekly trends which are part of the monthly trends and so on.

An investor needs to be familiar with all of them to make sense of what is going on with the stock market.

See what our Elliott wave analysts see by following the link below.

Energy ETFs: The Top Pick of Traders and... Robots Everywhere!

Oil prices are soaring and the world's biggest oil ETF, the USO, hit a 1-year high on October 20. Now, energy markets have won the hearts of traders and... robots alike! But before AI "bet big" on energy, Elliott wave analysis set the stage for USO's advance -- two months ago!

Commodity ETFs: The "Spice" of Life for Commodity Traders in 2021

After a four-month sideways trend, the Invesco Commodity Index ETF shot up in September on the way to its highest level since late 2014. See the chart and forecast that anticipated the big move.

EXCLUSIVE

MBB: Where Are "Mortgage-Backed Securities" Headed Next?

"Mortgage-backed securities" is a phrase that sends shivers down the spine of investors who remember the 2008 financial crisis. MBB is an ETF that tracks these securities -- watch our Interest Rates Pro Service editor walk you through MBB's 10-year wave pattern to see what's likely next.