Investor sentiment has become “extremely greedy” and that is making the market fragile, according to Fairlead’s Cathy Stockton.

  • According to Farilead’s Cathy Stockton, investor sentiment is getting “extremely greedy.”
  • On Thursday, she told CNBC that markets are becoming fragile in response.
  • She added that recent market breakouts are more of a short to medium term nature.

After a strong start to the year, the stock market now looks vulnerable as investors appear to be overzealous, according to Fairlead Strategies’ Cathy Stockton.

In particular, there were encouraging breakouts in the stock market in January, which usually indicate broader participation as a wider range of stocks fuel the rally, Stockton told CNBC.

But since then participation has been narrower, with the Nasdaq outperforming the S&P 500 amid heavy exposure to a handful of mega-cap tech stocks. The S&P 500 is up more than 7% year-to-date, while the Nasdaq is up nearly 15%.

She predicted that such dominance would be fleeting with a relative pullback likely to be a test for the market.

“The mood has become, as we call it, extremely greedy,” Stockton added. “Perhaps you could see it yesterday in bitcoin. This greedy feeling makes the tape brittle.”

Other market analysts have also noticed signs of a stampede into the market lately.

The stock market’s 20% rally off the mid-October low triggered the FOMO trade and forced some investors to exit the market and return to equities, according to a note by Ned Davis Research.

“The fear of missing out is back. Even some investors who doubt the Fed will be able to plan for a soft landing were reluctant to join us,” NDR said.

And Vanda Research found that retail investors are spending a record $1.5 billion a day on equities as the 2023 rally sparks fear of missing out on big gains.

Meanwhile, breakouts and incremental improvements on the stock charts appear to be more short-term or medium-term in nature, Stockton said on Thursday.

“Short-term breakthroughs are probably already exhausted, and this does not yet affect long-term performance,” she added.

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