Bears evaporating

Latest AAII bear sentiment reading is crashing again. We would ideally still need to take out recent lows, just to make sure there are no bears left.

There are still a few guys out there thinking this can turn down…

Refinitiv

US multi-asset funds have increased their equity allocation. Looks like poor market timing but hey, it might just work out in this type of market. Also; there is actually more room to buy equities to reach previous high allocation.

Morningstar

Kolanovic: “We believe that the last supercycle peaked in 2008 (after 12 years of expansion), bottomed in 2020 (after a 12-year contraction) and that we likely entered an upswing phase of a new commodity supercycle. Mostly it will be the story of a post-pandemic recovery (‘roaring 20s’), ultra-loose monetary and fiscal policies, weak USD, stronger inflation, and unintended consequences of environmental policies and their friction with physical constraints related to energy consumption and production”

Kolanovic

Oil is reversing right in the upper part of the trend channel that has been in place since November lows.

Believe it or not, but this is the first negative candle in oil 9 sessions.

Noteworthy is that oil volatility, OVX, actually trades down today.

Nobody is “stressed” about oil moving lower…cheap hedges.

Refinitiv

SPY, where the big gamma is, has traded in long gamma land for some time, but note we are entering the “real” big phase of the long gamma should we continue higher.

Dealers will be selling deltas in rather big size if this continues higher from here, all things equal, making SPY trading in a more sticky fashion.

Spotgamma

Index skew is back to pre GME crisis levels, having given back all that “sudden” stress. As we wrote during the de grossing days, “do not buy protection when you must, buy it when you can”.

What about single stock skew?

The upside call mania has continued strong, and single stock skew continues to price single stock calls very expensive relative to puts.

Yes, the world is chasing the inflation/reflation rainbow, but for the ones managing risk dynamically, overwriting single stock calls makes sense given how expensive calls are over puts.

Another strategy is hedging downside with relatively cheap single stock puts.

Second chart shows single stock call bonanza remains huge.

GS

GS

Forgive us for calling a (short term temporary) top in the earnings upgrade cycle in the US. The chart shows 1 month & 3 month EPS revision for USA. Even analysts need a break…

JPM Quant

Frequent readers of TME are familiar with our “love” for Chinese tech/internet. KWEB is the main play, but we have to admit it is starting to get a little elevated up here. RSI is approaching delicate levels and the space is becoming slightly crowded when we talk to pundits.

KWEB is +41% from pre New Year lows. It is time to take some chips off the table and move on.

Second chart shows the “power” of Chinese tech vs NASDAQ.

Refinitiv

Refinitiv

Not the normal mania, but the mania of the mania. Soc Gen delivers another great self explanatory chart.

Second chart was presented a little while back and shows the longer term rise of bad balance sheet stocks in the Russell.

People love this stuff…

Soc Gen

Soc Gen