Monday, September 29, 2025

Ninth Inning of a Blowout

There is a widespread belief that the stock market tops on euphoria.  In practice, that’s usually not the case.  Most of the time, investors are more bullish in the 6th inning of a bull market than in the 8th or 9th inning.  If you want to compare this bull market to a baseball game, it starts in October 2022, which is the 1st inning.  This bull market is 36 months old.  The peak of bullishness for this bull market happened in late November/early December 2024, when the euphoria of a Trump victory and hopes of a repeat of 2016 to 2020, as well as tax cuts and deregulation got everyone bulled up.  That was about the 6th inning of this bull market.  Back then, the SPX was trading around 6050.  Now, about 600 points higher, and investors are less bullish now than back then.  

I would say we are in the 8th or 9th inning of this bull market.  It is a blowout.  The bears have shown only a few short moments (October 2023, August 2024, April 2025) of glory, while getting pummelled the rest of the time.  But the game is almost over, and the winning team is no longer as enthusiastic about the game.  

You can look at the AAII, NAAIM, and other sentiment surveys which show less bullishness than late 2024.  Some use this as a reason that this bull market has more to go because investors aren't super bullish. If you look at the 2020-2021 bull market, investors were the most bullish in early 2021 when all the Covid stimmies were being passed and you had the re-opening optimism. By late 2021, despite a much higher SPX, investors were less enthusiastic as there was no new catalyst to look forward to.  It appears we are at the same point now as in late 2021.  The latest catalyst, Fed rate cuts, is well known, and just not that potent when it fails to bring down 10 year yields.  

In order for a bull market to make an extended run, it needs to keep the bullish psychology going with fundamental catalysts, not just higher prices.  The Trump tax cut/deregulation catalyst was used up in late 2024.  The Fed easing catalyst started in the fall of 2024 with the 50 bps cut last September, stopped in December, and has restarted again just recently.  This catalyst is very weak, as inflation is still high, and sticky, and with minimal effect on long end yields.  

The AI boom catalyst is still ongoing, but it is aging and very well known.  There are cracks that are forming in the hyped up AI theme.  NVDA's earnings report in August was a beat, but not as big as many expected, and the stock traded down afterwards for several days.  NVDA has lagged the SPX ever since that report.  You are seeing AI deal announcements which are quite circular.   A deal based on hopes that OpenAI can get financing to pay for AI infrastructure from ORCL.  A deal based on vendor financing (NVDA making an equity investment in OpenAI so they can keep buying NVDA chips).  Perhaps NVDA is seeing that the hyper scalers are nearing their threshold for AI capex spending, and need OpenAI to buy even more chips.  

The OpenAI - ORCL deal boosted ORCL by over $100 from the $241 September 9 close to the top at $345 on September 10.  Two weeks later, with the SPX higher than it was on September 10, ORCL closed at $283 on September 26, giving back more than half the gains on the announcement.  The OpenAI - NVDA boosted NVDA from $176 to $184, to only give it all back in the following 2 days.  The price action in AI stocks is not quite matching the enthusiasm of all these Wall St. analysts.  

It's quite clear that the SPX bull market is dependent on the AI capex boom continuing in perpetuity.  That is the dominant driver of corporate investment, which feeds into the earnings for the most important stock in the SPX: NVDA, as well other huge names like AVGO and ORCL.  The combined market cap of those 3 stocks is nearly $7 trillion.  When the hyper scalers cut back on AI capex and the AI bubble pops, it will have huge ramifactions for both US GDP as well as the earnings for NVDA, AVGO, and ORCL.  Not just that, all the high flying utility stocks that are banking on huge electricity demand from all the AI data centers would be in for a huge disappointment.  As NVDA goes, so goes the SPX.  

Why would the hyperscalers cut back on AI capex?  The main reason would be because they are not getting a return on investment.  Another reason could be because they have enough GPUs and AI data centers to do their LLM training and fulfill their inference needs.  Remember back in 2021 and 2022 when Facebook changed their name to Meta because they were going to spend tens of billions on the metaverse?  Well, they stopped spending when their stock kept getting pummelled as Wall St. realized META was rapidly burning money in a bonfire.  When Wall St. starts to punish big cap tech for burning tens of billions on AI capex with no ROI in sight, that's when the CEOs will listen and start cutting back.  Not there yet, but when it happens, that will be a game changer.  

We continue to see massive inflows into equities.  The so-called most hated rally has managed to pull in huge amounts into stocks.  From the BofA flows report, $88B has gone into global equities in the past 2 weeks, the 3rd highest ever for a 2 week period.  


Now that September is almost over and up almost 3% for the month, the seasonality bears have quieted down.  I still hear some say the markets will be "choppy" over the next few weeks, which is toned down from saying they will pullback over the next few weeks, like they did in early September.  So their confidence in seasonal patterns is definitely lower, but not fully shattered and embracing the bull train.  Another few days of strength into early October should force most of these seasonality bears to throw in the towel, which would be a welcome sight.  

Last week, we got an unusual surge in COT SPX net long positioning among commercial traders, which I suspected was triple witching opex related.  And with Friday's release, those suspicions were confirmed.  The commercials are now back to similar positioning from 2 weeks ago.  

COT SPX Commercial Positions

More importantly, asset managers are now the most net long in SPX futures since late March.  
COT SPX Asset Manager Positions

In the options market, the put/call ratios have been trending lower and are now at extremes on a 10 day MA basis.  Investors are getting complacent and trading few puts and more calls.  


Covered shorts last week.  Still not seeing enough in the price action to justify a longer term short position.  But this market is getting very stretched and it feels as if investors are not as enthusiastic as they were earlier in the rally.  This along with the large inflows into equities is puzzling, and means that you probably have weaker handed buyers coming in over the past few weeks.  Those late buyers as well as the max positioned systematic funds are the potential sellers into any October weakness.  

Considering how extended the SPX is without any meaningful catalyst on the horizon, you could see a sharp correction soon.  But there are still little walls of worry that the market can climb:  government shutdown, econ. reports, and bearish seasonality (still!).  If the market continues to climb this week to another all time high with lots of complacency, that could be a spot to put on shorts.  You cannot short in the hole vs. this monster.  Can only short rallies and into strength.  The SPX is a monster that is still on a mission to crush all short sellers.  That needs to be respected, so only exquisite short setups will be taken.  

Monday, September 22, 2025

Air Pockets

The FOMC meeting where many feared a sell the news reaction picked the wrong asset class.  It was bonds that sold the news, not stocks.  We got a continuation of the equity squeeze higher, led by the most speculative quantum and nuclear stocks.  Shorts are getting punished again.  They are being targeted and focus fired by retail and hedge funds looking to squeeze out other hedge funds.  Shorts are in a world of pain.  The market is on a mission to squeeze out as many shorts as possible, leaving behind only the most well capitalized and stubborn shorts.  Only the shorts who can survive this barrage and stick around will be rewarded on the other side of the hill.  


The realized vol remains low, but VIX remains sticky with a floor around 15.  This kind of realized vol doesn’t merit a VIX at 15.  This kind of dull price action would normally cause VIX to trade around 12 to 13.  Yet options markets are not willing to price put options with such a low IV.  The options market doesn’t believe this low volatility grind higher can continue for long.  I agree.  Even with IV high relative to realized vol, I would not be selling options here.  Those looking to continue to collect premium by selling puts or selling covered calls are picking up quarters in front of a bulldozer. 

Relentless rallies like the past 5 months set up corrections that plunge through air pockets.   Air pockets form when the index rallies to all time highs and blast higher without much time / volume spent at each level.  Three examples include January 2018, November 2021/January 2022, and July 2024.  The crash in October 1987 is a classic example of an extremely overbought market forming big air pockets along the way, setting up an environment susceptible to a waterfall decline.   

January 2018 top

November 2021/January 2022 top

July 2024 top

SPX 6 month chart

The move from 6100 to 6670 happened in less than 3 months, with little time spent at each new all time high.  That's where the air pocket has formed.  Based on how big this air pocket is, the next correction should prove to be violent.  

The COT data was interesting for the SPX as of September 16.  Into the Fed meeting and after a 90 point rally in a week, leveraged funds went heavily short SPX and dealers took the other side.  Its not unusual for leveraged funds to fade moves, but it is unusual for dealers to follow the trend and reduce shorts into a rally.  This positioning might have gotten unwound into triple witching opex.  There was a big expansion in open interest so it seems to be triple witching related, but we'll have to see the COT this coming Friday to confirm.  But initial thoughts are that its not a good sign for bears.  If you are a bear, you want to see dealers add to shorts when it rallies, not reduce.  

Disaggregated COT data which show asset managers, leveraged funds, and dealers seperately is most useful when looking at SPX data.  The legacy COT data does have some uses.  Unusually, commercial traders have maintained a large long position since April as the market has continued to rally.  They are usually trend faders.  The last time commercials were very long as the SPX was rallying and making new all time highs amidst hedge fund skepticism was the summer and fall of 2007.  In the short term, this is a bullish factor for the SPX.  But long term, fundamentals, valuations, and investor positions in stocks are more important than futures postioning.

Its insanity out there.  The stocks with the worst fundamentals are performing the best.  Its a meme stock bubble riding on top of a US stock market bubble.  Intuitively, this feels like a blowoff top thats near the apex, which makes it dangerous for both longs and shorts.  The most shorted stocks are ripping, as well as retail favorites.  There is some overlap between the two, as some of the retail favorites are heavily shorted.  



For longs, they are taking on massive left tail risk once the insanity ends.  For shorts, if the insanity continues for even a few more weeks, it can be quite painful as shorts get squeezed even harder.  Based on the COT data, I am scared that this thing squeezes out the shorts even more before violently reversing.   It is hard picking tops in an irrational bubble, you cannot stay short for long if prices are going against you.  That’s the position that shorts are in right now. As a short seller, you have to be nimble.   Only when prices are going down and staying down can you maintain shorts for more than a few days.  

The price action in bitcoin and ethereum is interesting.  You had a huge wave of euphoria in crypto in July and August, and a lot of these crypto treasury ponzi schemes used the liquidity to unload loads of new shares on the public to buy cryptos.  Now all that stock issuance is coming home to roost.  There just isn't much more demand to buy these crypto treasury stocks or the cryptos themselves.  MSTR has been trading very weak vs. bitcoin since July.  Bitcoin has been trading weak vs SPX since July.  You would figure that a Fed cutting cycle would be favorable for cryptos, but that market seems saturated with retail bagholders who don't have an appetite or the ability to buy more.  

As the quantum and nuclear plays skyrocket, the crypto names have been left behind and trade very heavy.  They used to all go up at the same time (like in July), but that's not happening despite SPX squeezing to new all time highs almost every day.  This shows that there are limits to the retail traders' capital that prevent all boats from rising.  Its not like 2021.  There is no massive fiscal stimulus helping to fund all the insanity.  The job market is weakening.  The fiscal juice is just not the same as it was a few years ago.  It means that stocks can jump, but they can't fly.  And when they jump, its hard for them to all jump up together.  There just isn't enough retail trader ammo to pump all the speculative stocks together. 

As for the SPX and NDX, those are another story.  They are dependent on institutional flows, not retail flows, which only help a bit at the margin.  Institutions are still believers in the AI theme, and are still bullish based on Fed easing.  But I think that's a fragile bullishness that's based on looking at the rear view mirror on AI, and orthodox thinking that Fed easing is always bullish for stocks.  

This time, the Fed is not the one in charge.  Its the White House and Congress, and they are mostly on the sidelines after the OBBB passed.  The fiscal largesse is not what it used to be.  Yet almost everyone on finance TV and in podcasts talk dollar debasement, and giant fiscal deficits as if 2025 is like 2021.  Its not.  There isn't a bottomless well of money looking to go into the stock market.  In fact, the cash balances are near record lows at mutual funds.  At SPX 6205, percentage of financial assets in equities was 45.4%. Based on current SPX of 6664, the percentage of financial assets in equities among US households is nearing 50%(roughly 47-48%).  For comparison, during the dotcom bubble, it only got up 38%.  And during the 2021 everything bubble, it got up to 42.4% at the top.  

American households are heavily positioned in stocks, which makes the US economy extremely dependent on the stock market to keep it going.  If you do get a bear market, it will have big ramifications for the US economy as the wealth effect is bigger than ever.  The US economy is completely financialized, meaning the stock market has a huge effect on the economy.  

Holding large postions short in SPX and heavily short/ meme stocks.  I will be looking to reduce those positions this week, hopefully into seasonal post Sept. opex weakness.  I have a gut feeling that only after the seasonality bears and macro short sellers throw in the towel can you get a final top for SPX.  I do expect the meme stocks and retail favorites to top out before the SPX.  If we don’t selloff within the next 2 weeks, I expect seasonality bears to give up, and also macro bears after the next NFP report on October 3.  I want to hold on for a long term short but can't be stubborn when the price action is going against me.  Will look to get out sometime this week to reload at a later date.  It still feels like we could have a bit more of a rally, as absurd as its been. 

Monday, September 15, 2025

Great Expectations

This relentless, obnoxious rally has been jumping over midget hurdles for the past few weeks.  This display of strength has frustrated bears befuddled by the continued rally with dips quickly bought.  

A list of the hurdles that this bull has overcome since the start of August:

August 1: bad NFP number
August 12: feared CPI number
August 22: feared hawkish Powell at Jackson Hole
Early September: feared bearish seasonality in September
September 5:  bad NFP number
September 9:  bad NFP revisions number
September 11: feared CPI number

The US stock market has overcome all those "potential" negative catalysts because of the pot of gold at the end of the rainbow: Fed rate cuts.   That is driving this aging bull market.  We have the much anticipated FOMC meeting on September 17.  Expectations are high.  

You also saw continued optimism about AI, with ORCL's huge 1 day rally on future AI revenue forecasts.  Of course, those projections are contingent on OpenAI keeping their promise, on Larry Ellison keeping his promise.  I wouldn't hold my breath.  You already saw a big chunk of ORCL's gains taken back from Wednesday's highs to the Friday close.   If that ORCL announcement was made in July, I doubt you would have seen it pullback so hard off the highs.  It's a clue that investor positioning is quite saturated in large cap tech stocks.  It is why Russell 2000 has been outperforming the Nasdaq for most of the past month.  

While the SPX and NDX continue to hit new highs, the 2 biggest retail AI names: NVDA and PLTR are both down several percent from their all time highs hit in August.  Those are subtle signs that investors who want to invest in those names already have.  Now, with rate cuts on the horizon, investors are chasing more speculative names to try to get more bang for their buck.  

On Friday, you saw big moves in the quantum stocks (IONQ, RGTI),  speculative crypto stocks like BMNR, and of course the biggest meme stock of them all:  TSLA.  You cannot underestimate the short squeeze factor.  Hedge funds have historically high gross leverage in their portfolios, meanings lots of longs and lots of shorts.  A lot of high short interest names got squeezed higher, which is a continuation of the trend starting in July.  It appears a lot of hedgies are feeling considerable pain in the short side of their portfolios.  

Exhibit A for this short squeeze is OPEN.  The Chamath SPAC from the go-go days in 2020 is the hottest meme stock in the market.  It also happens to have big and growing short interest.  26% of the float is shorted.

OPEN is the poster boy for meme mania, as the worst the fundamentals, with lots of short interest, the better the squeeze potential.  Its a toned down version of the meme stock bubble of 2021, when GME and AMC went crazy.  It always ends badly, but the speculators all think that they can get out near the top before the bubble pops.  Of course, there always has to be bagholders on the way down.  Eventually, these ADHD traders lose interest and the stocks take the long road to lower prices.  Like AMC below.

The crypto space continues to pump out more PIPEs as the Ponzi continues.  The latest big one is ORBS, which raised $270M by issuing PIPE shares to buy Worldcoin, a worthless alt coin with Dan Ives hired to pump it.  They are feeding the ducks while they are quacking.  The Winklevoss twins IPOed Gemini on Friday, trying to hurry and go public when they can.  You are seeing more and more IPOs lately as private companies are hurrying to go public while the investor appetite is there.  Very late stage bull market behavior.  

What kept me from holding long term shorts was not wanting to get in front of the rate cut optimists pumping stocks higher.  Ever since Jackson Hole, Treasuries have traded quite strong in anticipation of a dovish Fed.  Now that we've had quite a stock and bond rally so far in "bearish September", it sets up a post FOMC hangover.  

You saw 10 year yields bounce back higher on Friday after the euphoria wore off over the CPI numbers.  Given the weakness in the labor market and the rate cut anticipation, you would have expected bonds to act stronger this week.  But with European and Japanese bond markets trading weak, there just isn't that much demand from overseas investors.  China is basically taking all their dollars from their enormous trade surplus and piling into gold, avoiding US Treasuries like the plague.  Its a different era, without Fed QE, you are left with a bunch of price sensitive buyers who don't want to pay up for something with such a huge growth in supply.  The US debt is at over $37 trillion and rising $2-3 trillion per year.  

The economy is clearly slowing but I continue to see lots of denials and stubborn optimism about the economy. The most common reason for the optimism are the big fiscal deficits/ one big beautiful bill / deregulation / AI capex which are expected to support the US economy no matter what happens.  But what has been ignored is the much lower immigration numbers holding back population growth, a key component for GDP growth.  The only things holding up the SPX are AI capex spending and Fed rate cut expectations.  If one of the two fail to deliver on great expectations, there is a huge air pocket below.  

In a past age, when Treasuries were a premier risk-off asset, with a slowing economy with Fed rate cuts coming, buying bonds would be a superior trade to shorting stocks.  But as mentioned earlier, inflation is just too sticky, and the supply deluge too big to make me a long term buyer of Treasuries.  I prefer to make a risk-off bet by  shorting stocks rather than going long bonds.  

We are about to enter the corporate buyback blackout period which usually runs from mid September to late October.  All buyback blackout periods coincide with post triple witching opex, a time when stocks are usually weak.  Below is a rolling estimate of corporate buybacks with historical data:  

Started a short position on Friday with plans to add this week.  Unlike previous short attempts, looking to hold for several weeks as conviction now is higher.  The rate cut optimists are overplaying their hand.  As mentioned before, Fed rate cuts just don't mean much in a fiscal dominance regime + most mortgages locked in at much lower rates.  Lots of room for disappointment during this rate cut cycle.  

Monday, September 8, 2025

Rate Cuts are Coming

Interest rates are now the main focus after the much feared nonfarm payrolls came and went without much damage to stocks.  Friday's reaction to a bad NFP number wasn’t as dramatic as many expected.  The bad jobs number now all but guarantees a dovish Powell at the upcoming FOMC meeting.  The CPI this week is all but meaningless.  In a weakening economy, the Fed prioritizes jobs over inflation.  

Investors are conditioned to believe that lower Fed funds rates is bullish for stocks.  Its likely they will be buying in anticipation of a rate cut and a dovish Powell on September 17.  I do expect Powell to come out dovish, but that’s going to be expected.  Unlike going into Jackson Hole, when the majority were bracing for hawk Powell, but got dove Powell, the expectations will be much higher.  Unless Powell goes big with 50 bps, its probably a sell the news reaction.  Given how reluctant Powell was to turn dovish until last month, I doubt he does the 50 bps.  Especially since he's going to be replaced, there is no need to pander to Trump now.  

Rate cuts are not what they used to be.  In fiscal dominance, lower short term rates means less interest expense for the government, which is less fiscal stimulus.  Lower Fed funds rates means less interest income from T-bills and money market funds.  Most of that interest income is going to the wealthy, who have a high propensity to invest in financial assets.  Less interest income = less inflows into stocks and bonds.  

A weaker job market means less consumption, which feeds into lower corporate profits.  It also means less inflows into 401k's and equity funds.  Passive inflows into index funds and target date funds has been one of the biggest factors in this bull market.  Its clear that the jobs market is slowing, a combination of less immigration, aging demographics, and tariffs.  

Counterbalancing the negatives of a weaker labor market, bond yields went down significantly across the curve, which is a short term positive for the stock market.  When bonds outperform stocks, like last week, target date funds and pensions have to rebalance by selling bonds, buying stocks.  It is this strength in Treasuries which makes me want to be more patient in putting on index shorts.  

Not much in the COT data for index futures, but the COT for VIX futures shows a continued expansion of speculative shorts in VIX.  This sets up a possible VIX explosion higher when these shorts are unwound.  After a 5 month rally, the market is a powder keg.  Any spark that gets investors nervous could cause an explosion. 

VIX COT Positions

I noticed last week an unusually large number of fast money trader warning about September weakness as if it was a near certainty. That’s not common.  Seasonality usually doesn't work when most traders and investors are focused on it.  I think it was these seasonality bears that caused the sharp drop on September 2.  A weak jobs number may be setting a bear trap this week.    September weakness mostly comes in the first couple of days, and then in the  2nd half of the month coinciding with the post triple witching opex period.  This week could be a short window of strength leading up to the FOMC meeting. 

While the SPX was barely up last week, the path from Friday close to Friday close was quite volatile.  Despite the Friday drop, VIX went down and SPX fixed strike vols also dropped.  SPX fixed strike vols going lower even though SPX went down is short term bullish.  However, looking at the important components of the market, signs of weakness remain.  NVDA, which is the most important stock in the world, is lagging badly.  The momentum stocks and retail favorites also mostly underperformed last week.  In the past, retail investors were a non-factor and could be ignored.  But they have become an important segment of the market.  Their increasing participation has caused the market to be stronger than it would otherwise be.  Signs of weakness among heavily owned stocks among retail is an important tell.  Something to keep in mind as we get closer to FOMC and the big triple witching opex on September 19.  September opex is a big vol dampener on both upside and downside, as there is huge open interest.  So definitely would not recommend chasing any big moves from now until September 17.  

Covered all short positions last week, as I was wary of being short ahead of NFP.  On the sidelines for now, waiting for higher prices to re-short.  The plan is to wait until after CPI is released on Thursday to see how the markets react, and assess the situation then for a possible short.  Not everything goes according to plan, so will adjust if conditions change.  

Tuesday, September 2, 2025

Will the Beatings Continue?

For 4+ months, those who have sold have mostly regretted it.  Either selling their longs or getting short.  They say that the beatings will continue until morale improves.  This market has beaten the bearishness out of the shorts and telling them to throw in the towel.  Those with thoughts about tariffs, economic weakness, and the huge selloff earlier in the year have gotten punished.  Morale doesn't usually change in a few weeks.  It takes time for short sellers to feel enough pain to force them to cover.  It takes time for uptrends to re-establish, for volatility to go back down.  Which means it takes time for CTAs and vol control funds to get back to being heavily long after being flat to short in April.  It appears that enough time has passed for investors to get off the sidelines and jump in.  

Recent allocations for the biggest trend following ETF, DBMF, show them massively long index futures, not only SPX, but also MSCI World developed and emerging markets.  This was not the case as recently as a month ago.  But the rip to new highs after the quick dip on August 1 got the CTAs near max long.  As of August 21, CTAs are at the 94% percentile in net long exposure.  This is actually higher than their net long position in late 2024, before all the rumblings from tariffs rattled the market.  

It has been nearly 5 months since the April bottom.  5 months without a significant pullback is significant.  5 months is enough time for most investors to put the big selloff into the rearview mirror and reload their equity exposure.  A look at past big rallies off of significant bottoms have run into trouble around 4 to 5 months.  The latest examples are August 2023, April 2024, and December 2024.  Each of those local tops was preceded by a rally of between 4-5 months without a 5% pullback.  

From a technical timing perspective, the odds are favoring a 5% or more pullback within the next 2 months.  That doesn't guarantee a pullback, but combined with other data and how investors are behaving, the odds look favorable on the short side.  From a risk/reward view for the next 2 months, I see at most 100 points of upside for SPX, and anywhere from 300 to 800 points of downside.  So while it may be a 50-50 coin flip of whether the market is up or down for the next 2 months, there is a lot of asymmetry between the two outcomes.

Seasonally, we are entering the weakest month of the year, which has been repeated a bit too much by the crowd for my liking.  But most of that September weakness happens after September triple witching opex, which is September 19.  Its very possible that we grind higher towards that September opex, frustrating the seasonality bears who are short just because its September, and then have a rug pull afterwards.  September post opex also coincides with the start of the corporate buyback blackout period from late September to late October.  During that window of smaller than normal buyback flows, a sudden risk off move can accelerate more quickly than usual.  

Under the surface, there are divergences and signs of an upcoming trend change.  One of those is the Russell 2000/Nasdaq ratio.  We are seeing enthusiasm again for the small caps, which used to be a bullish sign back in the day, when there was ZIRP and endless QE.  Now, its a sign of investor overexuberance and trend exhaustion.  For the past few weeks, the RUT has continued to outperform the NDX.  Unlike what the old school paper napkin chartists tell you, strong breadth after an extended rally with laggards rallying while leaders lag is bearish, not bullish.  


Bitcoin is the best indicator for risk appetite among aggressive, speculative retail and institutional investors.  These investors are a small minority of the total investor pool, but have a big effect on prices as they are active traders that are usually price takers, going with the flow.  They are the ones that move markets.  When they are saturated with stocks/crypto, that tells you their next move is likely to be to sell.

Bitcoin has now underperformed the NDX over the past 3 months.   That underperformance has been particularly noticeable and sharp in the past 2 weeks.  The top in bitcoin coincided with lots of euphoria over crypto this summer, which makes this bitcoin underperformance even more meaningful.  There are lots of underwater, trapped longs in the crypto space now.  
IBIT vs QQQ

Another divergence I have noticed is the relative weakness of the NDX vs the SPX, in particular, momentum and large cap tech favorites like PLTR, MSTR, META, MSFT, and bitcoin have recently lagged badly.  

Last week, we saw some more signs that another piece of the momentum trade, AI, is getting tired.  NVDA sold off after beating earnings on Thursday, and the selling accelerated on Friday.  

As I write, we are getting a big gap down as the seasonality bears are on the prowl, fear mongering about seasonal weakness and historically the worst month for stocks, September.  While I am short, I don't think its going to be straight down from here for all of September.  Its possible that there is relief buying after the jobs number, as a weak number would raise expectations for the Fed to be dovish at the September meeting, while a strong number would alleviate fears of a weakening job market.  There is still the much anticipated Fed rate cut at the FOMC meeting on September 17, along with triple witching opex on September 19.  That provides a backstop for bulls, so not expecting a big decline just yet.  

Entered into some SPX and single stock short positions last Wednesday and Thursday.  I anticipate a bit of weakness ahead of nonfarm payrolls, which could be a spot to trim shorts.  Depending on the price action this week, may trim some short positions ahead of NFP on Friday.  We are likely to chop in a small range until September opex, so I wouldn't get too aggressive on the short side just yet.