Hey, Ross here:
There’s a lot of money piling onto one side of the Nasdaq right now.
Maybe those traders have nailed it.
But if they haven’t…
Getting out could get ugly fast.
Take a look:
Chart of the Day
Leveraged funds have been pressing their bets against the Nasdaq-100.
Since mid-June, their short exposure has climbed roughly 35%…
And it’s now sitting close to record territory.
So there’s a pretty large group of professional traders positioned for more weakness in Tech.
Maybe they’re right.
The Nasdaq has been choppy, the broader market is still working through this pullback, and there are plenty of macro reasons to stay cautious.
But now look at this:
August produced something we don’t see very often.
On the S&P 500, volatility on up days was about 2.2 times greater than on down days.
That ranks around the 97th percentile going back to 1986.
For the Nasdaq, the ratio was about 1.9 times, around the 94th percentile.
In plain English, the green days in August were unusually violent compared with the red ones.
So now the Nasdaq is entering September with leveraged funds holding one of their biggest bearish bets in years…
After a month where upside moves were already unusually aggressive.
If those shorts are right, no problem.
But if the market turns against them…
There’s a lot of money that may suddenly need to get out of the same trade.
Insight of the Day
Crowded trades don’t predict the turn – but they can make it violent.
A lot of traders look at positioning data and immediately try to turn it into a directional signal.
“Everyone’s short, so stocks must rally.”
That’s not how I use it.
A crowded short can stay crowded for a long time if price keeps moving lower.
And if the Nasdaq breaks more support, those traders could be sitting exactly where they want to be.
What changes things is when price starts moving against a crowded position.
Now every new piece of good news hits a market where a lot of traders are already leaning the wrong way.
A normal bounce can turn into a sharp rally.
A breakout can take off faster than most expect.
The reverse is true too.
If support gives way and those bearish traders press harder, downside momentum can accelerate.
So I’m not looking at these short positions and trying to call the exact bottom.
I’m looking at them as stored pressure.
Whichever side takes control next has a lot of positioning sitting behind it.
That’s why I’m watching the tape and the data so closely.
The broad market is still messy.
But underneath it, there are sectors starting to separate…
Stocks building clean setups…
And enough money leaning in different directions that I think we could see some very sharp moves before September is over.
We just want to make sure we’re on the right side of them.
P.S. Have you heard about the stock most likely to win from Trump’s gargantuan oil deal?
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