Surrounded by speculative excess everywhere, our short positions in select hyper-overvalued US equities remain key tactical holdings in Crescat’s Global Macro and Long/Short funds. November’s market move appears to be a last gasp for stocks, which are suspiciously out of sync, with the downturn in the business cycle already in progress. In our view, investor positioning is historically imbalanced based on a composite of indicators:
-The put to call ratio for US stocks just hit its lowest level since 2000
-Options volume has surged to its highest on record
-21.6% of all call options were bought by small traders, the largest level since the tech bubble
-Median short interest for the S&P 500 has plunged to 17-year lows
-We now have the largest percent of S&P 500 members above their 200-day moving average in 7 years
-Market sentiment, measured by the Investor’s Intelligence, is at its highest level since just prior to the Volmageddon shock in 2018.
-According to SentimenTrader, for the 1st time in 15 years, 60% of their indicators are showing an excessive amount of optimism, the highest reading yet.
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