Professional money managers were leery about buying stocks during the recent rebound, judging from Bloomberg's Smart Money Flow Index, which tracks Dow Jones Industrial Average moves in the first and final 30 minutes of trading.
The thinking is that smart money will test the market and wait until the end of the day before committing to any large moves.
The last time SMART money and the market diverged this much did not end well for stocks...
The index is hovering at its lowest in two years - since the start of The Shanghai Accord - suggesting a very different regime has recently begun.
One thing is for sure, volatility is back and most notably the VIX term structure has been inverted for a significant period of time - which itself is unusual...
As Bloomberg notes, backwardation is a tell-tale sign that stress is still built into the market -- typically, contracts for further months are priced higher since the future is less certain. So even as global equities rally, traders are happily paying a premium for a contract betting on another bout of volatility sooner rather than later.
However the biggest 'regime shift' is the one that has been so-ingrained in investors' minds - thanks to central bank exuberance - over the past few years, that it is now ubiquitous... except in the last few months Buy-The-Fucking-Dip has failed...
CNBC reports that according to Bespoke Investment Group, buying on the dip has gone out of style in the US stock market.
"The YTD [year-to-date] pattern has been a very big spike at the open towards highs of the day between 10:00 and 11:00 AM," Bespoke said in a note Friday.
"There are bouts of volatility back and forth, but the biggest swing lower comes in at the end of day trade right before the close."
"The YTD intraday performance chart suggests that the most reactive buyers are piling in early while the smart money is selling into the close," Bespoke said.
Which confirms the chart at the top - buying any fucking dip intraday has officially ended!