On Sunday, I was sitting around watching some football, scrolling through Twitter… I must admit, I’ve never seen so many blown calls from either. Let’s focus on the…
“FinTwit” side of things for the sake of this community.
The amount of bearish predictions for a complete financial crisis was off the charts, and I can understand the sentiment.
I, like many of you, have been worried the market was on the cusp of something breaking. Over the past two weeks, we’ve seen multiple currency interventions, a bailout of British pension funds, and a blow out in bond spreads.
However, as the old saying goes, if everyone is predicting the same thing, the opposite will probably happen.
Actually, I’m not really sure that’s an old saying, but it is the basis for using sentiment readings as a contrary indicator. We’ve certainly reached an extreme in bearishness whether it be measured by Investor Intelligence polls, the put/call reading, or the VIX.
And yet, maybe the biggest tell that we reached some form of capitulation is that investors were saying they were bearish they were not acting that way…
In fact, they were even continuing to buy the dip.
According to ETF.com, for the week ending September 16, U.S.-listed ETFs brought in nearly $25 billion, the second highest amount since August.
Then, things took an abrupt shift over the past two weeks when $14.5 billion left the market during the week of September 23 and $16.2 billion during the week of September 30.
We also saw a surge in bearish positions and protective hedges.
Wall Street short positions increased to levels seen during the pandemic low, the currency crisis of 2011, and the financial crisis of 2008.
Retail investors, who had previously only known buying YOLO calls, suddenly found the idea of buying puts an attractive idea. Last week, some $18 billion in put premium was purchased.
As you can see, that is an off-the-charts number…
While that might all seem like enough due diligence to formulate an opinion, I still maintain my conviction in my market outlook.
While this is not financial advice, I maintain that SPY eventually…
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