Stock Market Warning?
According to Bank of America, 60% of bearish signals have now been triggered. Historically, when this number reaches 70%, a stock market peak tends to follow shortly after.
And for once, Europe’s largest market / economy may actually agree with the above. The gap between the current level of the DAX and its 200-day moving average is widening. This may cause some concern. But, also remember, that a market can stay irrational longer than you can stay liquid….
Add to that another interesting datapoint, that the appetite for risk is pretty high. Leveraged long equity ETFs assets reached a record $95.0 billion last week. By comparison, during the 2021 stock market mania, leveraged long ETF assets were $67.6 billion, or 29% lower. Since Q3 2022, total assets in funds using derivatives to make long bets have TRIPLED. At the same time, leveraged short equity ETF assets have declined by $13.3 billion, to $8.5 billion. In other words, for $1 in leveraged short ETFs there are a record $11 in leveraged long ETFs.
Sources: BofA, TME, Kobeissiletter, Bloomberg Intelligence
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