Pretty wild stats on market positioning

December historically tends to be a “momentum” month due to tax lost harvesting and end of year reporting (companies want to own winners and sell losers)

Could this set up for a big reversion to the mean (ie big tech crash) in the new year, or are we betting that the momentum continues?

Pretty wild stats on market positioning  December historically tends to be a “momentum” month due to tax lost harvesting and end of year reporting (companies want to own winners and sell losers)  Could this set up for a big reversion to the mean (ie big tech crash) in the new year, or are we betting that the momentum continues?

Alex

What do you mean by passive @Jerome Cody - is this a metric or your finger in the air gut check?

Jerome Cody

I have said a few times outside of the short period where it looked sketchy that your best bet if you want to go bearish on tech stocks is probably the calendar flip to 2024 producing a repeat of 2022.

But no, positioning isn't stretched yet. We were at 100 on passive when the S&P was flirting with 4600ish in the summer and are at 77 now.

I have said a few times outside of the short period where it looked sketchy that your best bet if you want to go bearish on tech stocks is probably the calendar flip to 2024 producing a repeat of 2022.  But no, positioning isn't stretched yet. We were at 100 on passive when the S&P was flirting with 4600ish in the summer and are at 77 now.

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There are actually lots of examples of 10% rallies in bear markets, 20-30% rallies also happen. 

High volatility to the downside brings short squeezes brings people thinking it’s over before it’s over buying the local peak

https://www.moneyshow.com/articles/dailyguru-59424/a-look-back-at-historys-bear-market-rallies/

We rallied 10% in 3 weeks. How is this a bear market rally? Every downward trend is broken. We didn't even have a single pullback.

VIX has imploded over the last two weeks, it will explode to the upside once again. To me this heavily feels like a bear market rally: Market / stock price breath is extremely thin, many ShitCos (heavily shorted ones) exploded to the upside, same with cryptos / alt coins while stocks reporting earnings wildly swung around (see TGT / WMT e.g.) - all a bit too close to last year's summer high.

Sam Mendoza

Todd Smith

There are actually lots of examples of 10% rallies in bear markets, 20-30% rallies also happen.   High volatility to the downside brings short squeezes brings people thinking it’s over before it’s over buying the local peak  https://www.moneyshow.com/articles/dailyguru-59424/a-look-back-at-historys-bear-market-rallies/

We have successfully navigated a number of damaging bear markets over the past 40 years — the first of which was the 1987 Crash, recalls <strong>Jim Stack</strong>, money manager, market histori

A Look Back at History's Bear Market Rallies

I mean, the way this rally started does remind me more of the 2022 BMR's than something like 2021 or 2019 (seriously - the way the S&P moved post BTFP until the end of July reminded me of 2021), but do we largely just have to wait and see?

Rally was because the market thinks it sees rate cuts Q1 or Q2 next year. It wants the liquidity. Keep following that train of thought, and what was mostly bought & sold in this move. When do rate cuts typically occur? Why do they occur? When the long end of the yield curve steepens or flattens, what are the reasons?

If GDI and GDP diverge with rates holding steady what does that mean? Job data revisions? Inflation going down, or just fluctuating by .1 to .2 plus or minus each month? If they all suddenly align up or down next month, what does that mean? How will bond market react, how will fed react? Based on that, how should you position with high PE stocks, or sectors that are cheap or more defensive and are approaching deep value?

Further, what drives massive 10% moves these days (think about it - a year's move in two days?). Historically, stocks drive the options market. These days, huge amounts of 0 DTE options drive dynamic hedging and the futures / stock prices. MSFT right now ripped for no reason other than shorts using it as a hedge against their own Nasdaq short position getting squeezed. The VIX won't help you as that looks at 30 day volatility. single day and weekly expected moves have been poorly priced by options the past 2 years. buyers of short duration (< 1 week) volatility have been rewarded, sellers crushed. We see more chaos like this in high interest rate environments - how should you position yourself? Are you looking 1 year out or 10 years out? Skip the FOMO and go all in on short duration bonds and wait for the chaos to calm down? This is only something you can answer.

You can choose to have a thesis and maintain it as long as the basis still exists, and use that to make decisions, along with a inverse / alternate thesis to see what gets validated or not. You can choose to stay in our out of sectors because, as many on this forum say, they are in it for the 10 year long haul. Should you be in high PE growth for the long haul or look at safety in bonds and cheap cheap value that are almost like bonds?

Or you can reply "nobody knows hur durr buy VOO". Everyone was cheering on the insane valuation of Walmart just like the news media, while coming up with reasons after the fact to dunk on Target. All the claims of 'different business models' and other made up junk. Reality - Target had a ugly chart, Walmart had a pretty chart. They were going to mean revert. Perfect Pairs trade. So finally Target earnings proves it was waaaaay oversold, and Walmart warns it is looking at consumers being exhausted (into a holiday season no less!). So the rug has been finally pulled on retail. What is next? Care to answer, or more VOO for you?

Rally was because the market thinks it sees rate cuts Q1 or Q2 next year. It wants the liquidity. Keep following that train of thought, and what was mostly bought & sold in this move. When do rate cuts typically occur? Why do they occur? When the long end of the yield curve steepens or flattens, what are the reasons?  If GDI and GDP diverge with rates holding steady what does that mean? Job data revisions? Inflation going down, or just fluctuating by .1 to .2 plus or minus each month? If they all suddenly align up or down next month, what does that mean? How will bond market react, how will fed react? Based on that, how should you position with high PE stocks, or sectors that are cheap or more defensive and are approaching deep value?  Further, what drives massive 10% moves these days (think about it - a year's move in two days?). Historically, stocks drive the options market. These days, huge amounts of 0 DTE options drive dynamic hedging and the futures / stock prices. MSFT right now ripped for no reason other than shorts using it as a hedge against their own Nasdaq short position getting squeezed. The VIX won't help you as that looks at 30 day volatility. single day and weekly expected moves have been poorly priced by options the past 2 years. buyers of short duration (< 1 week) volatility have been rewarded, sellers crushed. We see more chaos like this in high interest rate environments - how should you position yourself? Are you looking 1 year out or 10 years out? Skip the FOMO and go all in on short duration bonds and wait for the chaos to calm down? This is only something you can answer.  You can choose to have a thesis and maintain it as long as the basis still exists, and use that to make decisions, along with a inverse / alternate thesis to see what gets validated or not. You can choose to stay in our out of sectors because, as many on this forum say, they are in it for the 10 year long haul. Should you be in high PE growth for the long haul or look at safety in bonds and cheap cheap value that are almost like bonds?  Or you can reply "nobody knows hur durr buy VOO". Everyone was cheering on the insane valuation of Walmart just like the news media, while coming up with reasons after the fact to dunk on Target. All the claims of 'different business models' and other made up junk. Reality - Target had a ugly chart, Walmart had a pretty chart. They were going to mean revert. Perfect Pairs trade. So finally Target earnings proves it was waaaaay oversold, and Walmart warns it is looking at consumers being exhausted (into a holiday season no less!). So the rug has been finally pulled on retail. What is next? Care to answer, or more VOO for you?

Alex

A group of likeminded people in The Most Important Thing are talking about this.