
Stock Melt-Up May Be Imminent. Careful What You Wish For
This is a "precarious time for bears," Nomura's Charlie McElligott said Tuesday, as calls for a bear market rally grew louder, even as the recession choir sang on.
The simple case for a (possibly fleeting) bounce in beleaguered stocks centers on the notion that sentiment extremes are good contrarian indicators and sentiment is extremely poor.
A more nuanced, technical assessment takes us through familiar dynamics as OpEx looms.
"There is just massive 'short $Delta' from associated demand for
Buy the current dip, then sell the big rip and later buy the deeper dip, in the vortex of a probable recession, easy.
All the algos and AI need to be updated: don’t fight the Fed when the Fed is trying not to fight.
I first just chuckled when I read your post, but after some pondering, I tracked it down. It’s a good point. The better algos keep morphing as past relationships no longer seem to hold. Dynamic modeling! Well the Fed has made a 180 degree change here. The models will have to catch up. Eventually they will, as they “unlearn” what they “learned” before.
Static risk control/vol parity models will quietly lose investors and close down eventually. It’ll be interesting to see how long this takes.
Never wrong, often early
Opportunity to adjust exposure to where one would like it to be for the rest of the bear market.