Has sell the rip transformed into a FOMO chase? Friday was a very powerful day and most that “planned” to buy “cheap” stuff missed buying post the first move higher on June 21. Expecting things to come down again, they were shocked by Friday’s px action. The psychological set up here is very powerful. Goldman’s Flood sums it up well: “Today felt like a potential pivot point with bid getting healthier as we finally saw L/Os come in and passively buy (they have been net sellers on every single trading session since 6/7). FOMO is real at the moment (MFs currently sitting on well over $200b in cash right now and buying will intensify on moves higher). This community also took advantage (as buyers) of the abundance of liquidity on the closing bell today…. Today is not an all clear but I would certainly be more patient selling this pop as it was highest quality rally I have seen in over a month”. Don’t forget there is some month end re balancing stuff to be executed (approx $33bn says GS), as well as other supportive flow (here).
Less than a week ago, last Monday, we outlined the bounce arguments in our thematic email (premium subs only, here) “Is this the bottom?”. Since then the SPX has bounced around 7.5%, taking a lot of people by surprise. Some of the macro narrative changed this week and the biggest difference from a trading psychology point of view is that so many we talk to have been waiting the entire week to buy this at lower prices. Imagine the pain if this continues moving even higher from here…So what is the short term potential? The last bear market rally was violent and saw the SPX bounce by around 9%. If we see a similar rip, SPX should be reaching around 4k, which is the first serious resistance. Note this is the upper part of the negative trend channel as well as the 50 day moving average coming in slightly higher.
Refinitiv
So NASDAQ managed bouncing in the lower part of the trend channel again. It is not a perfect channel, but the lows continue to be connected with the same trend line. The previous bounce lasted for approx 12% from lows to highs. If we are to see a similar squeeze, the NASDAQ could bounce up to the upper part of the trend channel, right where the 50 day comes in. Second chart shows NASDAQ vs US 10 year (inverted)…watch those yields closely.
Refinitiv
Refinitiv
Not according to asset managers and their positioning in equity futures. With SPX +7.5% from recent lows, things are getting increasingly frustrating for the crowd that are not long enough…
Macrocharts
Investors have sold energy and materials aggressively. As we outlined in late May (here), energy insiders had been very busy selling. Guess somebody needs to sell high while the less informed ones need to sell low…
BofA
The GS “Sentiment Indicator” measures stock positioning across retail, institutional, and foreign investors versus the past 12 months. Readings below -1.0 or above +1.0 indicate extreme positions that are significant in predicting future returns.
Goldman
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