Thursday, August 27, 2009

More Fuel For An Equity Top

Goldman Sachs is out with a report on August 24Th, that most hedge fund managers are piling into NDX 100 Stocks. A-HA! The chasing beta theory is working. They also state the following:

-That Hedge Funds have increased long exposure to 31% from 17% from September 2008.

-Funds are no longer net short financials.

-The largest holdings are in Tech and Health Care.

This is just more further fuel that the market is being run up by hedge funds chasing performance as well as HFT programs. Remember, many of the hedge funds participate in Algorithmic trading strategies that piggy back the big boys like Goldman.

Many of the catalysts that fueled this great rally are petering out. Short interest is way down. Cant create short squeezes if no one is short. Cant create buy-ins when no one is short. We have seen many financials like BAC, WFC, and COF triple and quadruple from their lows, pretty much all on short covering. Where is the future fuel to move these stocks higher?

The NASDAQ has so outperformed the broader markets, like I said they would much earlier in the year, but this is also coming to an end. Back when I stated that NASDAQ was better, it was that tech was under owned,but now its become over owned, time to sell tech as well.

Its also very worrisome to see equity exposure also surge, too many people are in the same trade, when that happens we need to exit.

No comments:

Post a Comment