Timing Sector Rotation Fund Flows
Timing Sector Rotation Fund Flows
Money flow matters to market returns and that is why I spend so much of my daily intermarket and derivative analysis time spying sector rotation so we can find the trade before anyone else.
I am excited to announce 'we done good'.
Nomura's very-own quant guru McElligott has pronounced the recent Value and Factor Rotation (read: hedge fund short covering in 'oversold junk' ) as the 4TH LARGEST one-month drawdown since the GME-induced meme madness of January 2021:
"And here we are…experiencing a substantial de-grossing of Equities HF “Short” books over the past month, where “HF Favorite Longs vs Most Popular Shorts” has seen the 4th largest 1m drawdown since the crushing HF meme stocks unwind of early 2021..."
As clients know, June 1st everything changed. I spied what looked like a strong rotation building under the surface in oversold, left-for-dead ‘value’ plays and dash-for-trash.
June 1st "Stalking a Value Rotation" premarket live trading room rant and client post same day!
Not only did my Growth:Value ratio rollover same day my NYSE McClellan Summation and NYSE Bullish Percent bullish triggered long, I spied massive option positioning in IWM + related plays like CAT and shared it all with clients!
A few days later, we had the largest 1 day outperformance of $IWM vs $QQQ in over 2 years!
This was AFTER the Jr Tech rally that started May 1st with ZS, ADBE, etc along with the Bitcoin proxies - which made for a very profitable May and June.
Then I made the call that the Hedge Fund Factor Rotation theme would follow in July. You know, the NKLA, XPEN, RIVN, COIN, UPST, U, GRPN, TLRY, TUPs of the world. CVNA kicked it off as it is the poster child.
July 10th I warned clients that as hedge funds have been covering their very profitable ‘dash-for-trash’ plays short as their V.I.P. longs of mega-cap tech soften and fall, we weren't done:
MegaCap vs Non Profitable Tech:
As discussed Mon am, the Nasdaq 100 “special” rebalancing not only gives my growth-to-value rotation thesis mega legs, it also caused the worst trading day for HF in the past 10 yrs!
As VIP longs underperformed shorts by -387bps!
Yes indeed, it was the expected "DASH-FOR-TRASH rotation that triggered HF factor rotation/short covering.
All have some large shorts, +/or oversold Jr Tech/BTC bottom-fishing pattern, +/or value rotation. All with explosive volume.
July 22nd I updated the value rotation call for clients - time to take care: https://t.co/JvKr3NTTy5.
Then Thursday July 27th I warned loudly:
TIME TO PROTECT SWING LONGS. With no edge on earnings, and volatility poised to bounce, I said:
It's been a great run but time to protect: It looks too perfect. Something is wrong!
Then BOJ tweaked their YCC and markets swooned triggering VIX and we have been chopping violently intraday since!
How did I know? It's not my first rodeo
https://twitter.com/SamanthaLaDuc/status/1269318203966205958?s=20 (2020)
and before that (2019): https://laductrading.com/market-thoughts-historic-market-timing-calls/,
not to mention the GME craze (2021): https://laductrading.com/gamestop-has-no-stops/
Literally, it’s short-covering as the paired trade of long quality, short junk unwinds.
And it’s still in play. It was only a matter of time before TUPPERWARE got the treatment.
TUP in particular had a high short interest (estimated at around 23%) with a relatively low float when I recommended it at $.80. It shot up to $5.80 and I was featured in TWO MarketWatch articles on the subject.
To date, this factor rotation moves is one of the sharpest rises in momentum crowded trades in several years - approaching August 2018 and February 2021 levels according to JPM - See Chart Below!
And as I warned clients week before last:
My call has been that the Hedge Fund Factor Rotation theme in July, following my June 1st "Stalking Value Rotation" theme, almost always precedes volatility.
We are there.
Just as I go on vacation - LOL.
Yes, I will be away all next week BUT you have my my #Trend and #Swing plays, warnings well in advance that I have no edge with earnings and that volatility would be entering the market so time to protect, and that I am generally bearish as market breadth rolls over and net selling picks up.
Luckily for you, our wonderful Live Trading Room moderators will keep the room open every morning this week to help with chases and be available for any #custom-trade-support!!
And I will be back in a week! So until then, I wish you a great trading week!!
Did you enjoy #samanthas-market-thoughts posted above? Then you would love full access to her and her live trading room, detailed macro and intermarket analysis, not to mention full portfolio of trades across Chase, Swing and Trend timeframes!
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