Control Panel: Speculators bearish except few tech stocks

Bearish Bets Against S&P 500 Are Surging, Despite Love for Big Tech

Index would be negative for the year without the contribution of seven big tech companies

By Hardika Singh, The Wall Street Journal, June 4, 2023

Hedge funds and other speculative investors have built up a big bet that the S&P 500 will decline, marking their most bearish positioning since 2007. At the same time, they are preparing for a rally in the technology-focused Nasdaq-100, with net bullish wagers in recent weeks approaching the highest levels since late last year. …

The divergence in positioning reflects the fragility of the 2023 stock rally…The S&P 500 is up 12% this year, but it would be negative without the contribution of seven big tech companies… Shares of the 10 largest companies in the S&P 500 climbed 8.9%, while the other 490 fell 4.3%…[end quote]

This is like a game of musical chairs with only 7 seats left.

The tech stocks are vulnerable to increasing interest rates. A couple of Fed officials hinted last week that the FOMC might hold steady at the June rate-setting meeting – but they also said that the Fed could raise after the pause. Core PCE inflation hasn’t dropped for months and the economy is still strong. It’s likely that the Fed is not done raising rates yet. Certainly they won’t cut rates in the short term.

Why the U.S. Remains Far From Recession

The pandemic’s aftereffects fuel economic resilience despite rising interest rates

By Sarah Chaney Cambon, The Wall Street Journal, June 4, 2023

More than a year after the Federal Reserve began rapidly raising interest rates to tame inflation, the hallmarks of a widely expected recession remain elusive.

Employers are hiring aggressively, consumers are spending freely, the stock market is rebounding and the housing market appears to be stabilizing—the most recent evidence that the Fed’s efforts have yet to significantly weaken the economy…

Job gains, in particular, remain robust, pumping more money into Americans’ wallets. Payrolls grew by a surprisingly large 339,000 in May, and the increases for the preceding two months were higher than initially estimated, the Labor Department said Friday. … [end quote]

As long as employers are hiring, people are spending and inflation doesn’t drop it’s likely that the Fed will not cut the fed funds rate. About 60% of the speculators on the CME think the Fed will raise the fed funds rate to 5.25% - 5.5% or above in September. That is a caution for tech companies, zombies and banks.

Stocks popped on Friday as Congress finally got its act together and raised the debt ceiling. All stock internals improved as traders celebrated that the Treasury will be able to pay bills and the economy won’t spiral into a crisis. The Fed’s hint that they won’t raise the fed funds rate in June was another plus for the stock market.

The Fear & Greed Index was in Greed. Junk bond prices jumped and their spread over Treasuries declined gently. Similar to rising stock prices, junk bonds are showing investor confidence in a strong economy.

The Treasury yield curve has been rising, which means that Treasury prices are falling. Investors are moving away from the safety of Treasuries toward riskier investments. The trade is risk-on and gapped up on Friday.


The USD has been in a stable channel since the start of 2023. Its recent moves appear to be noise. Gold has stabilized after last year’s runup. “Doctor Copper” is in a downtrend due to the slowing Chinese economy. Oil is falling and OPEC is discussing production cuts. Natgas is bouncing along the floor.

The short-term outlook is bullish for stocks but there is plenty to concern us in the medium term. If OPEC cuts production and oil prices rise it could be that 70s show all over again. There’s no sign yet that inflation is dropping to the point that the Fed would consider a fed funds cut. The strong employment numbers hint the opposite. The expected recession is holding off so far despite several indicators that it will arrive soon…but those same indicators have said so for months. The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2023 was 2.0 percent on June 1, which is quite respectable and not a recession at all.

The METAR for next week is sunny. As always, the METAR is a short-term forecast. I still think it’s too early for buy-and-hold types to get into the market since I think the recession will eventually arrive and the stock market will tank. Nimble speculators might want to take advantage of the short-term trading window of the few stocks that are rising. Such a narrow selection of winners is a dangerous situation that risk-averse investors like me avoid.


Slowing economy should make speculators bearish. AI stocks seems to be one of the few growth elements. Every tech stock suddenly seems interested in AI projects.

“Sell in May and go away” is not in order this year. An interesting summer as those AI companies continue to report the strong earnings gains (promised, hoped for, fingers crossed?).

Nvidia reports next time August 23. They are expecting earnings to triple compared to the the same qtr last year.

I would not trust the market to be sunny at all this week. I generally do not prognosticate for a single week but this is more than just a single week right or wrong on my part.

Note the 200 MAs daily charts for the SPX and COMPQ are slightly turned down. Odd divergence against the 50 MAs.

More importantly on the Compq the CMF has been very green this year. When green for a while it goes brown. When deeply brown it goes green.

This could be a very sudden down. The main reason I can see is the commercial property. That involves the banks and possibly some residential markets. Moreover it can mean a pull back in the bond market and the equity markets.

The bigger issue the FED is tightening the money supply.

The rise from 2020 to 2021 was based on a very loose money supply. The CMF is very green. We can not be this green for longer in 2023. The FED is not helping that along.

The resistance and support are all part of the dance. We are at resistance in the chart, the last larger peak.

Indeed CNBC has been talking all week about how overvalued Nvidia is and whether the share price can hold, much less grow from here. Many need to buy in but they are waiting for the inevitable correction.

Good earnings are a nice driver, but guarantees nothing especially at rarified PE ratios.

Time to sell and take profits? Flip a coin!!

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Flipping a coin is not a strategy.

I wont offer in anyway a suggestion for the next few weeks.

The question is will the market fall to a deeper low within the next year? Is there a better opportunity?

Who buys “the market?” Which sectors will do best within the next year?

I would not know that. It is not my goal.