Is the bear market rally nearing its end?

The bear market rally was led by short covering, 0DTE options, central bank and TGA liquidity, as well as retail, CTAs, and managed money​. ​There isn't much fuel left for further upside based on our analysis​. ​

Downside risks have grown significantly with weakening fundamentals, leading econometrics, 0DTE mania, Fed and ECB tightening, as well as current stretched positioning​. ​As a result, we believe the bear market rally lives on borrowed time.

00:00 Intro

01:17 Most-shorted stocks outrun the market

03:47 Short covering has been a leading driver of gains in tech

08:14 Global equities have also seen intense short covering

12:06 Retail market participation showing an extreme

17:11 Net inflows by retail this year exceed that of 2020 or 2021

23:44 Retail market participation is elevated to over 20% of all market volume

28:38 What are they buying?

36:18 CTAs are very long this market

38:21 CTAs have a lot of exposure to sell

39:24 Managed money is aggressively long again

40:20 The last three times we saw managed money this long it ended poorly

46:23 50% of SPX options traded are 0DTE now

47:58 And it's not just in SPX, but SPY, too

52:06 Call volume has exceeded the last options-driven manias

58:35 Options account for 70% of notional trading daily now

1:00:43 Real rates are rising, which may pressure equities

1:00:53 Stock valuations and real rates are diverging

1:05:27 Deterioration in fundamentals is another risk that's building

1:08:55 LEIs suggesting we're headed towards recession

1:17:40 Sentiment is far from bearish extremes

1:18:50 Deleveraging remains the name of the game

1:21:09 PBoC and BoJ helped to spark this rally

1:27:35 Fed terminal rate priced at 5.5% currently

1:37:32 Fed tightening often breaks something

1:41:05 A Fed pivot may not be the turning point...

1:43:50 Assets of major central banks vs S&P 500

1:51:41 In conclusion (recap)

For a copy of the presentation used in this video, please see this PDF below.

Is the rally on borrowed time

.pdf

Download PDF • 2.23MB

If you have any questions or feedback please let us know.

To learn more about our deep dives into the world of macro, please visit MacroVisor.

Both Ayesha and I offering 1-on-1 and group coaching. If you are interested in learning more feel free to reach out by emailing hello@traderade.com.

As always we appreciate your support. Please know that investing and trading comes with the risk of capital loss. None of the views expressed in this video are meant to be taken as investing or trading advice. Before making any changes to your investing and trading strategy or positions, consult your financial advisor. To learn more, please visit the Disclaimer below and the linked Terms of Use page.