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Why it's time to be long and buying
The following is an excerpt from my latest Market Note sent to Collective members over the weekend. This section highlights why we’re bullish and buying here. Since the report was published, we’ve seen additional confirming evidence in a near-miss Whaley Breadth Thrust on Tuesday, along with a Buy Signal triggered in our MO Market Internals model.
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Sometimes the market corrects in price, sometimes in time, and always in sentiment.
Over the past month, we’ve seen the market chop sideways to slightly down—nothing like the sharper correction that positioning and technical indicators hinted at heading into December. Instead, what we got was a correction in time and sentiment with minimal downside action. And that’s a good sign.
Why? It suggests there’s a strong, patient bid coming in on every little dip—classic signs of broader accumulation.
Even better, short-term sentiment and positioning indicators have reset back to neutral territory, which gives the market room to run. Let’s break it down:
Trend Fragility: Dropped to a neutral 67% after peaking at 100% in early November.
CBOE Total Put/Call Composite: Saw its largest single-day spike on Jan 10 since the Dec 2022 lows (see chart below).
BofA Bull & Bear Indicator: Firmly neutral at 3.8.
MO Trifecta Lens Model: Down to 27% (major buy signals trigger below 10%).
MO Internals Aggregator: Climbed to 15% (major buy signals trigger at 20%).
MO Nervous & Numb Indicator: Flashed a major buy signal in late December (valid for 3m+).
SPX % of Members > 50dma: Fell below 20% last week—sub-20% readings mark bottoms.
And let’s not forget bonds:
Bond sentiment is completely nuked.
Rolling 3-month net TLT fund flows are at record lows.
TLT short interest is at an all-time high.
SentimenTrader’s “Bond Risk” indicator shows very low risk, this historically leads to strong forward SPX returns (see chart).
Recent updates from GS’s Tactical Flow of Funds team add more fuel to the bullish pyre:
Largest macro ETF shorting since 2021 at GS Prime Brokerage.
Elevated systematic short positioning in global fixed income.
Decline in leverage across professional and systematic investors.
Largest weekly inflow into money market funds since March 2020.
Peak corporate blackout period right now—but the corporate repurchase window opens on Jan 24, with 45% of S&P market cap returning to buybacks.
Oh, and don’t forget: positive SPX seasonality kicks in around Jan 22nd.
The Playbook
This tells us one thing: we want to be long and adding risk as long as two conditions hold:
The market stays above last week’s lows.
Bonds stay above last week’s lows.
Trump’s inauguration this week could serve as a catalyst to drive a ramp up higher in risk assets.
We’re already seeing a big shift in bullish sentiment among small business surveys, and overall investor sentiment remains surprisingly neutral-to-bearish given that the market is just shy of all-time highs.
The weight of the evidence points to a gearing up of U.S. investor sentiment and positioning — conditions that are ripe for upside acceleration.
To play this, we’re going to stick with what’s been working: BTCUSD, QQQs, USD, growth/tech names, etc.
Here’s what we’re focusing on:
BTCUSD: Reentered our long last week and will look to add on follow-through confirmation from the tape.
QQQs: Putting on a starter position with a stop below the recent wedge.
The MO portfolio officially closed things out with a +50.4% return on the year. The team and I will be publishing our eoy review soon, where we’ll dive into our painful mistakes and total blunders, as well as the things we’ve learned and what we’ll try to do better in the year ahead. So keep an eye out for that. And if you’d like to join our Collective as we tackle 2025 head on, just click here.
That’s it for now.
This week we’ll be pushing out trade updates as well as our annual portfolio review. Also, don’t miss Chris’s Sunday Setup tomorrow—it’s always worth your time.
Stay frosty.
Your Macro Operator,
Alex
The tricky thing with classic breadth reading is that as mag-7 index concentration rises you have more and crazy breadth surges but it’s really just the 493 balancing out tech. Very similarly dynamic in the late 90s