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Smart Money Preparing For Sell Off Like Never Before

  • Written by Syndicated Publisher 38 Comments38 Comments Comments
    November 28, 2010
    The following charts demonstrate, the smart money is now either bailing from the stock market in droves or hedging for a market crash like never before…

    First, from Sentiment Trader, here is the put/call ratio. Self-explanatory:

    From the same source: the Commitment of Trader report of commercial (not speculative) NDX hedgers.

    Also self-explanatory.

    And lastly, tieing it all together: the cash at mutual funds. Or, more correctly, lack thereof.

    The simple observation: dumb money continues to be at near record bullishness (IBD, AAII surveys), gold market timers are only 40% in, the smart money is short/hedged in size like never before, mutual funds have the lowest cash level on record, and have experienced 29 consecutive weekly outflows which have so far been compensated for broad NAV declines through artificial price increases: that will very soon end. We have heard through sources that following last week’s HF insider trading probe redemption requests at many of the implicated hedge funds* have gone through the roof. They will all have to sell some/many of their liquid holdings into the year end. Our only question: aside from the Primary Dealers, the HFT momentum traders who have no balance sheet, and the Federal Reserve: who is there to buy?

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