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03/28/2024
Thomas Thornton
info@hedgefundtelemetry.com

Consensus and positioning - Who's right?


One of the hardest puzzles to solve is understanding where consensus is and how people are positioned.  While at my hedge fund ahead of earnings reports or economic reports, we would make calls to all the sell side desks and ask "How are Goldman's clients set up ahead of this..."  It was quite valuable information and worked better than many fundamental inputs.  Strategas Research, who I think does excellent work,  polled 500 clients late last week asking many questions about the markets, politics etc.  A few of the takeaways were 50% expected a year end S&P price between 2,900 and 3,100 but a small majority see a lower low on the horizon.  A small majority like gold long and the US Dollar short.  Emerging markets garnered half the responses for what will do best through 2018.  Lastly, only 13% see the US 10 year yield under 3%.  Again, they are one independent research firm, I highly recommend... and they are nice guys too.  

Below I run through some of those markets and look at sentiment, market positioning, and the charts.  It's a good exercise to know where is consensus and how people are positioned especially after the past two weeks. 

Notable:

  • US Markets, Emerging Markets, and Bloomberg World Index
  • FANG Stock Update
  • Currency Update
  • Crude and Natural Gas Update
  • Bond Update
  • Gold and Gold Miners Update
  • Short Sellers 2, Sketchy companies 0
  • DeMark Screens

 
US Markets, Emerging Markets, and Bloomberg World Index


SPX bullish sentiment is at 43% pulling back from Wednesday's 52% reading.  My call was sentiment would bounce to 50% and stall after such a dramatic drop from January all time highs.  It's going to be very important to follow the next few weeks action here.

 
SPX speculator positioning dropped 37% from very high bullish levels.  This isn't a surprise considering the reading is taken on Tuesday's and the previous week saw the big drop in the indexes which is when they lowered exposure.
 
SPX daily shows the bounce has now achieved the corrective wave 2 signal that also establishes a wave 3 downside price objective of 2,400.  Breaking out to new all time highs would negate this wave sequence and breaking the close from 2/8 would lock in wave 3.  
 


SPX daily chart with the DeMark Countdowns shows today on day 4 of 9 with an upside green Setup count.  If there are 9 consecutive closes higher than 4 previous closes then the red 1 on the downside will be negated  

 


EEM Emerging Markets ETF also has bounced from the downside green Setup 9 and is wave 2 bouncing.  The wave 3 downside price objective is now 41.74.  

 


Bloomberg World Index now has a red 2 of 13 with a downside Countdown but there is also a green Setup on day 5 of 9.  Same rules apply for the green Setup as it could negate the downside red Countdown

 
 
FANG Stocks Update


The markets have taken a bit hit but the FANG stocks have had the best relative strength from any other sectors or group of stocks.  The NYSE FANG+ Index did get an upside exhaustion red  13 from Friday.  

 


FAANG Custom Index (FB, AMZN, AAPL, NFLX, GOOGL) is nearing a new high and is on day 4 of 9 with a green Setup count

 


Same story with FANG (ex AAPL)

 


Nasdaq bullish sentiment is at 47%

 
XLK Tech ETF is also lifting on day 5 of 9 with a green Setup and has an unfulfilled red Countdown on day 12 of 13.  The little red + signifies the 13 would trigger today but remember the 13th bar has to occur above the 8th red bar for a true high.
 
FB is well off it's high and never was able to move back above the 50 day moving average.  A break under 168 support could lead to some significant downside.  
 
AMZN continues to be one of the strongest stocks nearly at a new high.  
 
 
AAPL has bounced strong off lows and has a green Setup on day 5 of 9.  There is a downside red Countdown on day 3 of 13 but it looks as if this could fulfill the green Setup which would negate the red Countdown.  
 
NFLX is up over 50% since November and continues to act very strong.  I can't advise it as a good entry here.  
 
GOOGL like FB has struggled to bounce like the others.  Could it be investors are shying away from FB and GOOGL for Government regulation fears?  Seems that way.
 
Currency Update


US Dollar bullish sentiment is at 31% and despite the USD making a new low last week sentiment has positively diverged as bullish sentiment hit a low of 8% on 1/24

 
US Dollar positioning continues to show speculators somewhat bearish but they were also set up this was in Q1 of 2017 and the USD bounced.  
 


US Dollar Index DXY is starting to show slight positive divergences with momentum but there is a downside secondary red Countdown on day 3 of 13.  The weekly (not shown) remains on week 12/13 - and the Euro weekly is the opposite on week 12/13 on the upside

 


Euro bullish sentiment is at 77% down from a recent peak of 87%

 


Euro positioning dropped a little but remains quite high

 
Yen has been lifting (this is inverted) but there was an upside green Setup 9 on Friday followed by a price flip today (green 1 where it's trading lower than 4 previous closes)
 
Crude and Natural Gas Update


Crude bullish sentiment is at 58% up from a recent low of 32%.  The volatility in Crude has been reflected with the big moves in sentiment.

 


Natural Gas bullish sentiment is at 41%.  This too has positively diverged with price.  

 


Crude positioning remains extremely overbought historically even with the recent pullback in Crude prices.  This is a concern if you believe crude works higher. 

 


Crude daily has bounced with the downside green Setup 9 and near the 50 day moving average yet there is a downside red Countdown on day 2 of 13.  Breaking 56.88 support would be likely see this head 10% lower

 
Natural Gas round tripped but is now trying to turn higher.  I want to see a few more days action before I do anything.
 
Bonds


Bond bullish sentiment is at 19% and remains oversold but without any trigger to turn bonds bullish

 


Bond positioning remains set up short despite some covering.  I bet if 3% is achieved the short positioning will be way too crowded.  Recall from the top, the majority of people expect >3%

 
The US 10 year yield continues to drift higher without much momentum
 
TLT Bond ETF had a good sell signal at 126 and has moved lower and has a downside red Countdown on day 4 of 13.  Bond weakness and higher yields from this chart should continue until the downside red 13.  
 
Gold and Gold Miners Update
Gold bullish sentiment is at 71% and off the recent high
 
GLD ran out of momentum at the recent highs.  I know a lot of people want and expect to see gold higher but I am skeptical  at this point.  
 
Gold Miners GDX ETF ran into the 20 and 50 day and reversed back down.  It's on day 3 of 13 with a red Countdown so we have to watch this closely.  I'm out of my GDX long trade and am neutral here
 
Short Sellers 2, Sketchy Companies 0
Marc Cohodes a legendary short seller who has uncovered many fraudulent companies in the past with his exhaustive rigorous fundamental and accounting research was short MDXG.  This one is quite the story and Marc has been vindicated.
 
UBNT has been under the radar of Andrew Left another very savy short seller who was one of the first loud short sellers in Valiant Pharmacuticals.  UBNT is now under some sort of SEC scrutiny.  
 
DEMARK SCREENS - Daily, Weekly, Monthly Upside/Downside Exhaustion Signals

Daily/Weekly DeMark upside/downside exhaustion signals (Sequential) Weekly updated on Monday's.  Price flips occur when a stock closes higher/lower than four previous closes.    

S&P 1500 Universe: 

DAILY UPSIDE 13:   ADBE, CSGS, DIN, LMT, MSI, X
DAILY DOWNSIDE 13: NONE

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    IO
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   CLI, LDL, SBRA, VTR

Updated: 2/20/18
WEEKLY UPSIDE 13:   AOI
WEEKLY DOWNSIDE 13:   ACN, ANDE, HWKN, MTSC, PSA

Updated: 2/1/1
MONTHLY UPSIDE 13:     CHD, CLGX, CLX, CNMD, DVA, FICO, IDCC, MSCI, ORLY, PAYX, TFX, VMC, XYL
MONTHLY DOWNSIDE 13:    GPOR

Euro Stoxx 600 Universe: 

DAILY UPSIDE 13:   KOMB CP, SGRO LN, SKG ID
DAILY DOWNSIDE 13: NONE

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    DLG LN
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   BT/ LN

Updated: 2/20/18
WEEKLY UPSIDE 13:    AC FP, DB1 GR
WEEKLY DOWNSIDE 13:   INTU LN, INVEB SS, ITV LN, MKS LN, NCCB SS, PFC LN, PROX BB, SESG FP,  TELIA SS

Updated: 2/1/18
MONTHLY UPSIDE 13:    COFB BB, GAS SM, GKN LN, ING FP, KINVB SS, OML LN, VIS SM
MONTHLY DOWNSIDE 13:   NONE


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