Are We There Yet?
Searching for the bottom
The key question now: are we “there yet”? Positioning has been unwinding fast, and a few signals are starting to hint at capitulation. The debate is whether this is the beginning of the end or just the end of the beginning.
Capitulation volume
SPY volume Friday jumped to the highest since last November's bottom.
Source: Subu Trade
One of the most bearish of the past few years
JPM: "Our US Tactical Positioning Monitor’s (TPM) 4wk change is now at -2.6z, one of the most bearish of the past few years."
Source: JPM PI
Signs of greater de-risking
ETF selling/shorting has picked up… as has broader short additions globally…
Source: JPM PI
Gross finally falling
Gross exposure has been pretty stubborn during this sell-off and it has been hard to believe that "we are there yet" before we have a proper de-grossing event. Goldman did however a report on Friday about some de-grossing among fundamental long/short funds.
GS Prime: "US L/S Gross leverage fell for a second straight week by -7.2 pts to 214% (50th percentile one-year)."
Gross across all strategies still however pretty high.
Source: GS Prime
Hedge fund nets
Down at some "local floor" according to MS PB. Below 50% is some sort of "buy" level for them.
Source: MS PB
More on nets
GS Prime: "Net leverage -2.9 pts to 75.0% (19th percentile 1-year)."
Source: GS Prime
Drawdown in nets
The drawdown in HF nets from highs is getting pretty extreme for All Strats.
JPM: "Further reductions in HF net leverage (-2% WoW for All Strategies) now leaves it at the 45th %-tile over the past 5yrs and 17th %-tile over the past 12m…in addition, the drawdown from recent highs of ~15% points is in line with some of the larger ones we’ve seen in the past few years."
Source: JPM PI
20th percentile
The level of aggregate US positioning is now around the 20th %-tile since 2015 or -0.6z (down from ~40th %-tile at middle of last week).
Source: JPM PI
Caution
Technical picture of course awful as we are closing below the massive 6600 level.
