Formue

Finanshuse: “Bears Beware,” kæmpestort Short Covering, makrofonde fortsat spektiske

Uddrag fra Goldman, JP Morgan og Goldman Sachs

Bears beware

Goldman’s sentiment indicator is still at “extreme” levels.

Goldman

Bears be very aware

Hartnett’s indicator is still stuck at an extreme 0.

Flow Show

Large short covering in past 2 weeks…

Shorts covered just about every day for the past 2 weeks, the level of covering has gotten relatively extreme at 2.5z, the largest since the de-grossing in early March of this year or de-grossing in March 2020. Hope for the bears that want to move from crowded consensus to cool contrarians…..

JPM PI

…however, not much happening on “net leverage” side

That single-digit percentile number on net leverage does not bode well for the bears.

JPM PI

Looking at “all hedge funds” gives some glimmers of hope for the bears

Net leverage at almost 80%-tile on a five-year look-back; yeah, that’s good enough to trade down on…

JPM PI

Equity inflow changes sentiment

As global equity inflows have switched from very negative to slightly positive, this overall compilation of indicators takes the first major step off total “risk-off”.

Trend following – the sharp reversal in momentum

In case you still wonder why we have seen the violent bid from “computers”.

JPM

Blame model momentum chasers?

If the latest rally is just a bear market rally or something else is to be seen. GS writes: “We think a further increase in positioning is possible near-term (which could further support the current rally). That said, without clear signs of a positive shift in macro momentum, temporary re-risking could actually increase risks of another leg lower in the market rather than signal the end of the bear market. This is particularly the case if the positive shift is driven by the systematic community and not by fundamental investors“. One thing is sure, whoever is to be blamed for the rally, the violent squeeze has produced huge p/l pain, and under performance is huge among pretty much all funds.

Chasers

The 1 vs 3 month realized volatilities spread has crashed recently and vol/model driven players have been forced into chasing equity exposure. Obviously the models have a slight lag built in, so we should expect more bids from this crowd. Second chart shows some of these model players and equity exposure. The volatility crash supports some re-risking according to GS.

Refinitiv

Pain trade poetry

It has been a very painful market for most people since the June lows. Hartnett with some stats: “biotech 38%, bitcoin 27%, Nasdaq 19%, UTIL 15%, 30-year UST 10% vs oil -28%, copper -23%, China stocks -14%, Euro banks -11%…QE winners (bonds, tech) outperforming QT winners (commodities, banks).”

GS adds some color to the squeeze (from Friday morning): “Coming into today US equities have seen net short covers for 5 straight days post FOMC. In $ terms, yesterday’s short covering was the largest since 6/24. We had HF short sellers in energy on heels of move lower in crude. Our most short energy basket (GSCBMSEN) traded -520bps lower”.

Bear markets – the long term view

SPX bear markets, peak to trough, since 1927. The average decline since then has been over -37%, taking around 240 days to bottom out. Let’s see how this one plays out….

Tier1Alpha

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