Sosnoff: After this week, the market comes back to earth

Retail Investor Sentiment - Retail investors currently account for about one-third of the trading volume in the MAG7 stocks, a decrease from previous years, indicating a potential shift in sentiment and confidence in the AI trade [1] - Despite a recent 1% sell-off, the market remains only 1-2% off all-time highs, suggesting that the situation is not yet critical [2] Market Dynamics - Recent weeks have shown increased nervousness in the markets regarding the MAG7 group, with investors taking profits as the year comes to a close [3] - There is a notable shift of funds into more traditional sectors such as industrials and financials, which may indicate a more cautious approach from retail traders [4][5] Retail vs. Institutional Trading - Retail traders are seen as the primary drivers of market movements, often leading the way for institutional investors who tend to follow later [11][12] - Retail traders prioritize liquidity, gravitating towards the most liquid assets to ensure fair pricing and maximize returns [10] Future Market Outlook - The market may experience a slight decline after the current week, which is characterized by significant options expirations (triple witching), but there is potential for renewed interest early next year [13][14] - The options market plays a crucial role in retail trading behavior, with a significant portion of retail trading activity now focused on options rather than traditional stocks [16] Leveraged ETFs - Leveraged ETFs are primarily used for short-term trading strategies and are not suitable for long-term investments due to inherent negative drag from their structure [20][22] - Retail traders are increasingly engaging with leveraged ETFs, which operate similarly to futures, indicating a trend towards short-term plays in the market [19]