Incoming $1400 "Stimmy" Checks Could Push The S&P Over 4,000

There's no doubt that the $600 stimulus checks that went out earlier this month put a charge into the market. Will the coming $1,400 checks push the market even higher? We think so.

We believe that another round of stimulus - at more than 2x the amount of the previous round - is an obvious catalyst that will move the market higher once again. We noted as such on January 13 when we posted to Twitter that the top 3 banks were "probably right" in suggesting calendar spreads because stimulus would pave the path for the S&P to breach 4,000.

This question was also explored by Bloomberg on Sunday morning, who arrived at a similar conclusion. Noting that the recent $600 checks caused option trading to explode and penny stock volume to skyrocket, the report points out that people "can’t help notice how tiny traders with money to spend keep turning up in the vicinity of almost every market spectacle these days". 

Then, the obvious question becomes: where does that extra money come from? 

Brrr...

Peter Cecchini, founder and chief strategist of AlphaOmega Advisors LLC, commented: “If the additional $1,400 goes to the same income levels it did before, we are highly likely to see additional speculation in stocks, which could continue to inflate an already-existing bubble. If it goes to people with below-average incomes, speculation will be less likely.”

Data suggests that people who got a stimulus check, across all income groups, traded 30% more in the first 10 days of January than at the start of December. Those who earn less than $75,000 per year saw a 53% jump in their trading, Bloomberg wrote.

And the coming $1,400 will hit bank accounts during a "full-blow market mania". Speculation is rampant not just in risky asset classes like cryptocurrencies, but in penny stocks, dubious startup companies and cash burning entities across all exchanges in the U.S. - we are at peak euphoria. In fact, the options market saw its second busiest day ever for bullish equity calls this week and penny stock volume is up 6x from last year.

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Ema Davidson 1 month ago Member's comment

Checks may not go out till mid February. Seate as a plate full of decisions to make