Risk Off

Detailed analysis below...

Huge risk off moves.

That’s really the best way to describe the price action in the stock market right now.

I talked on Sunday about the flow dynamics being very bearish here. Institutions were selling while retail was buying (with demand fading).

Institutions have continued to sell this week. Some new data in from Goldman Prime this morning: Hedge Funds have de-risked at the 2nd highest level on record in February (behind only the Jan ‘21 Meme Stock Mania).

Retail turned to net sellers on Monday and Tuesday (-$1B, -$428M) before returning to net buyers on Wednesday (+$1.2B). I will get the data in for Thursday’s bloodbath soon, but I’m guessing we saw plenty of retail selling.

With institutions already selling and now retail beginning to sell following record high inflows, it creates the perfect storm for the market pullback we’ve seen.

For the QQQ, we sliced through the 50-day MA on Monday. Yesterday, following the AI King Nvidia’s earnings, we broke the inside day support level ($511.36) lower and closed -2.8%. We closed Thursday right at 2025 lows and the Nasdaq is now down -2.1% YTD.

The QQQ is now -7.5% off its 52-week highs. For the SPX, we are -4.6% off highs.

So far, this is not even a major correction in the indices. A -5% correction in the SPX happens basically every year. A -10% correction happens in most years and a -20% Bear Market occurs once every 4ish years.

With that said, this price actions feels very different to me than any other correction we’ve had since this Bull Market began in October 2022. It looks different too.

The comparison I keep coming back to is the December 2021 Bull Market Top, because we are definitely seeing similar price action now to back then.