For the first time since the September/October time period, Zenolytics portfolios have moved to a net short position.
This is after being upwards of 200% long throughout the majority of January, taking advantage of primarily growth stocks with one crypto in particular (RNDR) giving us a 150% gain since August.
We are out of everything, but a couple long-term crypto names. Our portfolio of growth stocks has done what it was meant to do. That is to produce a furious snap back rally, riding on the back of short sellers, investors who were forced to take exposure into the new year, and dreadfully misallocated portfolios that were built on fear of Q1 2023 being a replay of Q1 bear market action in 2001 and 2009, as two examples.
During this past weekend I put out an 18 page report to clients with 17 charts detailing why, at a very minimum, it is time to be conservative with overall exposure to risk assets.
There are a number of factors involved in completely flipping our exposure this quickly, some of which are macro based, but most of which are technically based.
The bottom line is this: The markets are well behind schedule. I have been emphasizing in recent weeks that speed is of the essence moving forward.
This from January 10th, with the SPX at 3900:
This past Thursday we hit 4195 and reversed.
The fact we are sitting around 4100 is now a problem. This is the same vicinity the S&P 500 was during Powell's now infamous Jackson Hole speech on August 26th, 2022.
Two days before Powell spoke at Jackson Hole, the SPX was at nearly the exact same levels as prior to his speech tomorrow (today depending on where you are).
We have made no progress despite an abundance of clarity with respect to inflation and the Fed since the August Jackson Hole speech.
The markets are looking at something else. It's a guessing game right now as to what that is, with macro analysts coming up with everything from earnings to more rate hikes than anyone expects.
We don't necessarily need to know exactly what the market is looking at to delay making substantial progress. The fact that the delay is taking place, while numerous rejections take place along key resistance points in all types of major averages is enough to step back.
Investors must now demand clarity from price before further committing to a market that has seen a significant shift from extremely bearish to quite bullish in just a few weeks.
On January 17th, with the SPX at 3928, I tweeted the following:
We are right in the middle of squid game levels. Carefully consider your next moves.
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