Hey, Ross here:
Hope you had a fantastic Memorial Day weekend.
I know I did.
There’s a lot of contradicting narratives in the market right now.
Today, I quickly break down a few of them.
Chart of the Day
You may have heard that bond yields have been surging. It’s true.
And yes, this is generally speaking, a negative for stocks.
The hedge funds have increased their short exposure to the highest level in at least a decade…
And according to the weekly American Association of Individual Investors’ sentiment survey, the bears have now overtaken the bulls.
But at the same time, options data shows that the price for put options – aka the price of buying downside protection on stocks…
Have fallen to one of the lowest readings in the past 20 years.
In other words, many investors are still extremely bullish.
And they may have good reason to be…
Because when you look at the broader valuations backdrop…
You’ll see that valuation multiples have actually decreased this year (meaning the price growth is driven by earnings).
Put that all together…
And you get one, big confusing picture – chock full of contradicting narratives.
How do you deal with all of this conflicting information?
Well, below, I share with you one of the greatest insights I have learned after more than 20 years in the market.
Insight of the Day
You don’t need to reconcile all the conflicting narratives about the market in order to make money – because conflicting narratives create opportunity.
There will ALWAYS be conflicting narratives about the market – always.
Sure, sometimes there are more…
And sometimes there are less.
But those conflicting narratives will always be there…
Confusing traders, making them unsure about what to do next until they’ve “reconciled” all those narratives.
But one of the biggest insights I’ve learned after 20 years is…
You don’t need to reconcile all these narratives in order to make money.
Because it is all these conflicting narratives that actually create opportunities as investors bet on one narrative or another.
All we need to do is to get tactical…
And look for the opportunities created by these conflicting narratives.
More on that tomorrow.
Customer Story of the Day
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Ross Givens
Editor, Stock Surge Daily
