More about broader market speculative sentiment and its impact… zzzz… on the Marijuana sector’s “penny stocks.”

In yesterday”s Livestox, I discussed the past week”s broader market decline. The discussion was about how that might be influential to the marijuana sector”s recent strength, and how not. I”m elaborating below after reading questions/comments that members posted to the Activity Feed…

Capital may flow between more or less speculative stocks that are represented on the DJIA and NDX. This happens naturally with the ebbing and flowing of sentiment. It ebbs and flows between being more or less speculative. But that same capital does NOT flow between bigger capitalized DJIA/NDX stocks and penny stocks. Investors/traders that might choose VAPE over MSFT aren”t so well-funded that their absence will depress the NDX. But that relationship need not cut both ways, which I”ll address at the end.

The Marijuana sector might rally for its own internal reasons like legislation, acquisitions, or tax loss selling. Those features might be leveraged by there happening to be a greater speculative sentiment at the time. That speculative sentiment isn”t necessarily an extreme version of the same speculative sentiment that can benefit the NDX. Rather, it is its own speculative sentiment, beyond the normal boundaries of there being more or less speculative sentiment among bigger cap stocks.

My point in Livestox was that the MJ sector has started the year from deeply oversold conditions. Being deeply oversold has insulated the sector from the general sentiment shift in the broader markets. Rather than rallying sharply because they”re already on an upswing like in 2014 with attention from CNN et al showing long lines at Colorado”s newly-opened dispensaries, 2015 is reacting to the expiration of one source of sellers.

That is a general assessment of the sector. Specific stocks may be different. Some had bottomed already, so that this week”s buying is triggering breakouts above resistance. Some were at least not trending down further into year-end. But others have suddenly reversed up from trending down relentlessly to new lows, and those issues should be approached more cautiously, if not also skeptically.

Back to the broader market, and how both DJIA and NDX ends of the spectrum have been in decline. This is discounting the NDX price. This will eventually become an attraction that can suck out many MJ sector traders — less so to the benefit of the NDX, and more to the detriment of the MJ sector. Recent big drops in the NDX seemed to have no effect on the MJ sector. It”s not that the MJ sector is immune to NDX sentiment shifts — it”s that they don”t overlap consistently… Look out when they do.