"Hedge fund portfolio density rose to record levels in March, exceeding even the Financial Crisis highs. Hedge fund returns continue to grow more dependent on the performance of a few key stocks. The typical hedge fund has 68% of its long-equity assets invested in its 10 largest positions."
We could easily fall to 1,600 if not lower in the coming weeks.
Think back over the last 10 years - how different was your life in April 2006? While you may think your daily existence is largely the same (maybe the kids are older or you’re married now, but that about it…), consider what was actually different about your life in the spring of 2006:No iPhone;No Facebook (unless you were in college at the time); No Twitter; No Instagram; No Kim Kardashian; No Uber; No iPad.
Does an unprecedented show of positive breadth foretell a quick end to stocks’ recent struggles? (Hint - the answer is not what you might expected)
S&P 500 (June) now up at our 2070/80 bull target - the measured objective from the base and price resistance. With potential trend resistance not far above at 2090, we continue to look for sellers here. Russell 2000 stays trapped in its near-term range... Concern, as always, is that market positioning remains short, and if we start taking out resistance levels, we could see a big short stop out...
Joining its Small Cap (Russell 2000) and Tech (Nasdaq) peers, the S&P 500 just plunged back into the red for the year after desperately clinging to it for 3 weeks.
The story on Wall Street and CNBC continues to be that we’re in a correction and this is a buying opportunity. Even Warren Buffett joins the chorus of stock market cheerleaders for the skeptical public. Well, I agree with the skeptical public, not the experts here!
"Proxy hedging S&P500 with RTY (Russell 2000) puts continues to offer material value: A repeat of the Feb-16 sell-off would see RTY puts generating ~60% greater hedge benefit than S&P puts, at current pricing."
Amid a recent exuberant short-squeeze-driven bounce, the 'real' valuation of the Russell 2000 remains at insanely high levels (and gravely decoupled from credit markets). But as Dana Lyons' explains the market likes to do whatever will fool the most people. So while this level should at least be an interesting one in producing a battle between the Russell 2000 bulls and the bears, it would also be an ideal spot for the market to unleash its shenanigans.
A funny thing happens to an index's valuation when you choose not to entirely ignore the companies that have negative earnings (i.e. losses). Ever wondered what the P/E ratio of the Russell 2000 was given that it is full of companies where the 'E' is negative? The answer is simple - and ugly - as The Wall Street Journal exposes, the aggregate P/E of the Russell 2000 is over 200x which perhaps explains the gaping chasm between bond and equity valuations for this highly credit-sensitive cohort.