WAIT, I’M NOT FINISHED

I want to hit on this rotation discussion in more depth. I wasn’t pleased with the response I got to this.

This is a really big fucking deal. Acknowledge it.

OVER THE LAST TWENTY YEARS GROWTH HAS ONLY OUTPERFORMED VALUE IN ONE PARTICULAR INSTANCE. ONE!

Here is a chart of the Growth Index paired against the Value Index. At times the spread narrows, but Value typically outperforms. HF’s are leaning heavily on the Value side here based on market volatility.

FOR THE FIRST TIME SINCE 1998, THE GROWTH INDEX HAS CROSSED THE VALUE INDEX.

This is as of today.

This needs to sink in a bit. Back in January, we had this discussion often that this would be an important theme and element to the enthusiasm phase in stocks.

The ultimate market pain trade is a rotation of this caliber, accompanied by the short covering that occurs into escape velocity.

OA

Here it is:

This gets resolved tomorrow. Place your bets.

Really nice volume here late in the day.

It took the market all of 2014 to reverse their books from growth based to value based. I found myself swimming against this current for the first few months of the year, but if you watched or participated at all last year, it became increasingly obvious. It’s the main reason why the $SPX and $RUT look absolutely nothing alike last year.  Anything growth oriented was destroyed last year, while value kept the market afloat.

Knowing what you know about how long that current took to change the landscape of the market gives you some insight into how most of the HF community is positioned. Knowing how they are positioned, what’s the current pain trade in terms of rotation?

I brought charts. They indicate the spread between the Russell Growth Index versus the Russell Value Index:

This has only been going on since June, but this is a significant shift in this spread.

As this spread continues to improve, the more the market will realize that they aren’t properly positioned for this rotation.

At the beginning of the year, this was my main theme for 2015. Rotation back to growth.

Be aware of this into year end.

OA

Listen, its not too late.

Sure there’s a lot of fear and anxiety in the air. But you have to admit, if you’ve been warning of downside, you just found a pit in your stomach this morning as investors gobbled up a 1% gap like its was all they are going to get.

There were interested buyers left at the lows. A gap down that goes green in 30 minutes is a pretty good tell of that. Remember FOMO at the lows? Now the emotion here is “MIMO.”

Also, because Biotech, energy, and momo-stocks were clearly not participating yesterday is the perfect reason for them all to rip to the upside today.

The downside case is quickly losing it’s place here. Look out above.

OA

I got an email last night referencing the CBOE Skew index reading, which turned in its highest reading ever yesterday. Yesterday’s high of 148.92 was greater than it’s two prior highest readings in 9/19/2014 and 10/16/1998.

The Skew index starting turning high readings last year. In fact, I blogged about it about a year ago.

When investor anxiety is this high, the coming upside was intense.

Here’s a chart of the S&P in 1998, and highlighted is the Skew signal. Beneath is the S&P now and it’s signal.

Odd, no?

In response to the confidence in my feed recently that the market would be plunging lower today in crisis form, how do you feel about this response? Just holiday noise? Real crisis surfaces tomorrow? Real traders don’t sell out of respect for Columbus?

I’m emboldened by the 4 point range in the S&P today. She’s quiet as a lamb.

Since speed was the #1 signal we were looking at this week, it’s official; we’re off to a slow start. If this market were seller controlled, then they’d be selling this, no?

Rather than read too much into today, let’s continue to apply the same analysis over the course of the week.

I did way too much over here for such a quiet day. If things are quiet again tomorrow, try and remember that less is more. I’m going to try and focus on that this week and work on managing what I have already.

OA