Too much “7th heaven” in terms of sentiment & positioning?

Many sentiment and positioning indicators are flashing strongly over the past few days. Continued melt-up year-end rally seems to be conspicuously consensus.

The Goldman Sentiment & Positioning indicator has now exploded into the most stretched territory since the March sell-off.

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 return

Goldman Sachs

Perfect storm in terms of fund inflows brewing? The seasonality post elections strongly support such a thesis. The Retail Army needed to really create the year-end melt-up, as hedgies already all in

Haver

Latest AAII bullish readings sentiment needs little commenting.

It would be too perfect if this reversed lower from here…

Refinitiv

Fundamental L/S HF Length per GS PB at EXTREME HIGHS. Year-end melt-up pre-traded and "well-hedged"….

Other interesting data: The Value factor saw the largest net buying in more than three years, while the Growth factor saw the largest net selling in four months. That said, factor flows reversed again on Thursday with hedge funds back to buying Momentum/Growth and selling Value

Goldman Sachs Prime Brokerage

Ok, so the cool hedge-funders are already inside (all-in since a few weeks ago), drinking Crystal at the VIP tables. The wanna-be cool institutional fund mangers were a little late to buy tickets and enter, but they are now on the dance floor (see latest AAII data). Some of the crazy RobinHooders who normally are irrelevant for these type of bashes are now actually also inside because the have committed to only be drinking call-shots – and despite being low-ticket items they can be very important for creating the right melt-up atmosphere (gamma). Last week, the Bridge&Tunnel people came as well, and are now creating massive queues outside (retail equity fund inflow).

Now, what really could get this party going is if the quant nerds get a hunch of the party and start moving in. They run size and the better the party gets the more dollars they will contribute

1. As of Fridays close, GS systematic strats team forecast +$25B worth of equity demand over the next week in a flat tape and +$37B worth of equity demand over the next week in an “up modest scenario”.

2. As of Fridays close, GS systematic strats team forecast +$69B worth of equity demand over the next month in a flat tape and +$137B worth of equity demand over the next month in an “up modest scenario”.

No social distancing among the bulls; they seem to love crowds…

As posted earlier – latest AAII bullish readings sentiment needs little commenting. Now you might expect that hedge funds either had been selling just a tad to these late-comers – or maybe that the Monday MoMo Mayhem would have caused them to de-risk a little. Think again. They are still very much all-in.

Gross Exposure Level at 100%-tile since Jan-2018. Net Exposure Level at 100%-tile since Jan-2018 (data as of yesterday close from JPM PB).

This is unusual as it is a die-hard bear crowd.

Arbor