"Profoundly Dangerous" Market Exposed As Hedges, Shorts Evaporate

Tyler Durden's Photo
by Tyler Durden
Thursday, Jan 09, 2020 - 12:15

“This is a market looking through fundamental data, looking through corporate guidance and data points, looking through Fed guidance itself,” Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management, told Bloomberg Television.

“It is a market that wants to go up in the short term. That is what makes it so profoundly dangerous.

Blasphemy to most on Business TV, but it's time someone from the 'industry' came clean as to the farce that is occurring in the US (and global) stock markets.

For a sense of the decoupling - bottom-up - here are three major holdings compared to their 2020 Consensus EPS forecasts...

Source: Bloomberg

And top-down, stock prices are as decoupled from fundamentals as they have ever been...

Source: Bloomberg

And, by now, everyone knows why...

Source: Bloomberg

However, as Shallett warns above, the situation is getting a bit out of hand, where even The Fed may not be able to rescue any downturn.

No one is hedging...

The cost of a bearish put option versus that of a call continued to slide, recently touching levels that have been rare throughout the bull market.

Source: Bloomberg

Everything is rising together...

The latest surge has taken 82% of S&P 500 firms above their average price for the past 200 days, the highest percentage in two years.  Frank Cappelleri, a senior equity trader and market technician at Instinet in New York, says the current reading is a “frothy indicator we need to watch.” According to Cappelleri, the last time so many firms topped the key level, the benchmark fell into a correction not long after. “Eventually, many stocks will slip back below their long-term moving averages -- like they always do,” Cappelleri wrote to clients Wednesday.

Source: Bloomberg

And Shorts have disappeared...

Short sales in the SPDR S&P 500 ETF Trust, known by its ticker SPY, as a percentage of shares outstanding fell to 1.1% Tuesday, according to data from IHS Markit Ltd. That’s the lowest level since January 2018, before the event known as “Volmageddon” sent stocks swooning.

Source: Bloomberg

And Greed is at record highs...

Despite recent wobbles on geopolitical chaos, complacency is back at record highs...

Source: CNN

The red flags continue to pile up.