With The Dow Down 500 Points, Here’s How Sure Everyone Was…

Well, the bottom is falling out for stocks on Friday afternoon on the heels of a hotter-than-expected AHE print that exacerbated the ongoing bond rout.

And just in time for retail investors to get their asses completely burned after a January that saw a veritable avalanche of inflows into equity funds encouraged, in part, by Donald Trump and vacuous promises about the restoration of lost American “greatness”.

Over the last couple of days, we’ve shown you a variety of charts that seem to suggest everyone went all-in at the worst possible time. On Thursday evening for instance, we noted that TD witnessed a 50% increase in client activity in Q4…

TD

… just as everyone is busy Googling “how to buy stocks”:

Google

Well this seemed like a great time to show you a series of other visuals that underscore the euphoric mood that predominated right up until, well, until this week. These come from Deutsche Bank’s Binky Chadha.

Via Deutsche Bank

Aggregate shorts in cash equities and ETFs, led by cuts in Tech shorts, have for the first time fallen below the elevated range they have been in since the financial crisis.

DB1

Margin debt in brokerage accounts has risen to extremes:

DB2

While cash balances have fallen below the normal range:

DM3

Option market indicators had till last week painted a similar picture with the put/call ratio low:

DB4

Inflows into equities have surged recently to the largest monthly inflow on record:

DB6

Just one question for the folks whose actions in the market are behind those charts: “How’s that workin’ out for you?”

Dow

 

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5 thoughts on “With The Dow Down 500 Points, Here’s How Sure Everyone Was…

  1. I was one of those on TD Ameritrade increasing my normal amount of trades. Me thinks I was on the other side, I was taking profits and moving to defensive positions.

    Thanks for continually presenting the other side of the story.

  2. well Mr. H
    vol of vol is happening. i cant trade worth a Sh!%$!@ on IB. curbs in full force. exit doors are closed. us little guys cant trade even if we wanted too. thank God my IRA is short. we will see how long this all lasts. for now this bear will enjoy his fish with his butt in a cool stream on this hot winter day in California.
    good luck to all and a special thanks Mr H. for all your hard work and giving it away.
    you do us all a great service with your publication/blog.
    some of us are listing.
    sb
    ps.
    it is not a falling sword now–its a mid-evil 12 century sword used for lopping off heads.
    if the futures market is right Monday morning–hmm–well see equal or better declines.

  3. Before we start drawing conclusions as to what occurred this past week, it might be useful to observe and consider what happened in the last two minutes of regular open trading on the $INDU – i.e. open and notorious for all to see should they take the time to look. A notional value of nearly half a trillion traded on an uptick in that final two minutes – 7+ X’s the average of all preceding two minute periods on Friday. Something big has no problem being long the $INDU going into the weekend and no problem announcing that to the world.

  4. I’m not a trader or a market timer. but wish to thank Mr H along with William Bernstein et al for incremental incentives to rebalance to an appropriate risk allocation for my nearing retirement age. My human capital is now much less than my investment capital, so your blogs reinforced my decision to reduce equity/ fixed income allocation down from 60/40 to 40/60, more appropriate to one who has already “won the game”, especially in this current valuation environment. I also reduced longer duration bond positions and interest rate sensitive equities such as real estate. Reallocation was done over last 6 months, with major final reduction completed on Thursday 2/1/18. Thank you my friend.

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