Biggest Short Position on Stocks in History... (This Has Never Happened Before)

Asset managers and hedge funds have now built the largest Nasdaq future short position in history. Now, what does this mean for the markets in the context of the three problems we have right now in the markets that kind of stem from the same thing at the end of the day. Problem number one is the midterm elections and volatility and hedging around that. Problem number two is Fed shenanigans. Markets are pricing in federal rate hikes. Even Wells Fargo today says they think the Fed's going to hike rates once this year and once next year. And then you have inflation concerns, which are kind of feeding into or from the same problem, which is the Iranian conflict. So, in context of that, what does this mean for the stock market? Are we going higher? Are we going lower? In this video, we will also talk about the latest developments today in the Iranian conflict. Things kind of moved in the wrong direction today. Iran says that they are prepared to go on the offensive, that they have given the US a couple of weeks to come back to the negotiating table and to agree on the MOU after the 60-day official ceasefire came to an end. What problems or positives could come from that? I also want to share this clip with you from CNBC. It's from Stephanie Link. She says expect markets to grind higher into the end of the year. So, ladies and gentlemen, we got a lot to get into today. I don't want to waste your time here. Just do me a quick favor and hit the like button for the YouTube algorithm. And this video is sponsored by myself. If you guys want to come trade and invest alongside of us in our very specific strategy where we are looking to find the next opportunities before Wall Street does, wherever they are hardware software cyclicals industrials, does not matter. We are identifying and executing in these opportunities. We are up 88% year-to-date in the trading community. Yeah, down a little bit in the past 2 days or so, but I think we're just getting started on what will be one of the most opportunistic environments we have ever seen in our lifetime over the next 12 to 24 months. If you guys want to come join us in that journey, that link is down below in the description of today's episode. And I do have a 100% free course coming out on Patreon. You can also find that link down below in the description of today's episode that actually drops at 7:00 p.m. today. So, right as you guys are seeing this video, there are also two new videos over on Patreon for free. Introduction to how to find 10X stocks and lesson number one criteria necessary to become a 10X stock. Both of the those videos are about 20 minutes combined. Check it out. We're going to teach you exactly how we find these kind of opportunities, these 10X stocks. Okay, so I think the first thing that we have to dive into here is this news reported today. The asset managers and hedge funds have now built the largest Nasdaq futures short position in history. What's actually ironic about this, I'm going to go ahead and screenshot this here so we can doodle and zoom in and and do all that fun stuff so my head's not cutting off part of the image here. What you'll notice is actually every time the markets are super or Wall Street's super short on the market, it's actually a really good time to be investing. Right? All the way back into, you know, over here, like 2020 2021. Right? This was a pretty good time to be taking on new positions. Down here, right? 2022. It was a good time, at least in the short term, to be buying the markets. What about back here once we made the low in October of 2022. It was a great time to be buying the markets. What about here, you know, you get the idea, right? Every time you know, Wall Street is shorting the markets like this, it tends to be a pretty good time to actually be long the market. So, it's one of those inverse indicators that suggest if Wall Street is this short on the Nasdaq in the futures market you could actually have a very violent, aggressive rally going forward. Now, this could also mean that we have problems coming ahead. You know, you could have a historical precedence, you know, we're looking at the last 5-6 years here on the chart. It's there's going to be a moment where it doesn't work anymore. But, as far as historical normal patterns in the last 5 to 6 years, every time Wall Street is super short the markets like they are right now you want to be long the market. And I will tell you why there are so many short positions on the markets right now. I already did in fact. You have the midterm elections. You have the Iranian conflict. You have the markets pricing in Fed rate hikes. All of these things are what you would call event risk. So, there's event risk with all of these things. The next Fed meeting, the midterm elections, the next Iranian headline. The Iranian stuff is the only thing that we don't have a concrete timeline for. We could get news at any moment, good or bad news on this conflict that could change things for the market. That also feeds into what the Fed is expected to do. So, I think in the near term what happens to to markets is probably determined based on the Iranian conflict. If we start bombing each other again and all hell breaks loose and oil skyrockets again, bond yields are going to skyrocket again. Stocks are going to fall. Now, I am under the belief that Donald Trump wants Treasury yields to fall. He wants oil prices to fall and gasoline prices to fall heading into the midterms. So, I think you're so close to the midterms that the bar for escalation is pretty high. I don't think Trump wants to go out there, destroy the stock market, destroy voter confidence right before the midterms. Now, again, anything's possible, anything can happen here, but that would be my thought process at this moment. So, I'm I'm leaning towards de-escalation. If we do get de-escalation, if oil prices fall, that's also good news for the Fed, but it does not take away from the midterm election. The midterm elections in and of themselves, you tend to have a bit of downside from where we are today, about mid-August, through the month of September. September tends to be a bad month right before the midterms. And this is event risk hedging by Wall Street. They are hedging for volatility before the midterms and for all of these other reasons as well. Now, again, I've made the argument that the Nasdaq has already fallen 11 and 1/2% We're We're not even at new all-time highs. We're still recovering from that. The low was on July 29th. It's been like 3 weeks, okay? Not even 3 weeks since we were down 11 and 1/2% on the Nasdaq. Now, the S&P it barely fell, you know, because we have this this broadening trade, but the S&P fell about 4% from highs. So, S&P, Nasdaq, they look very different, okay? But even for the point of this video, we're looking at Nasdaq short futures. So, when I'm thinking about that, unless there is some kind of big bad news out of Iran or something like that, I don't see us going through another violent correction. But I do think we are going to have volatility. And I'm not surprised that even on a day like today, we are seeing that volatility. If you take a look at the heat map, you're kind of all over the place, right? There are some stocks in the AI hardware trade that are doing really well. Software is taking a bit of a breather today. Mag 7 also taking a breather. Look at Meta, down 4% today. Amazon down one, Tesla down 0.5, Google down 0.64, Microsoft down three, Apple down 0.68. And there's a lot of red out there. So, yeah, I I I'm I'm not surprised by this. Again, considering the bad news that we got today out of the Iranian conflict. Iran basically said today that they're going to start going on the offensive, like trying to sink, you know, US ships in the Strait of Hormuz to end the blockade if the US doesn't follow through with the MOU and the previous agreement over the next couple of weeks. Now, the deadline was very up in the air. Iran today said over the next couple of weeks. They gave a deadline apparently to mediators to give to the US, but we don't know what that deadline looks like. So, we don't really have a a time frame to go off of. And again, just generally today, it did not sound like we're moving in the right direction here. Although, it does look like Iran and Oman are very close to finalizing a deal for shipping lanes in the Strait of Hormuz. And a big question is, is Washington, is Trump good with that? Is it good enough to end the blockade? If it is, Trump might just leave the Strait of Hormuz if the Strait of Hormuz does open. And that would be a very positive development for the stock market. We actually heard this about 2 weeks ago um from like Reuters or something that was reporting on this. But apparently Trump told his advisers he's willing to walk away from the Iran war if the Strait of Hormuz opens even without a nuclear deal. So, that could be the path forward here. And if Wall Street is this short in futures, well, that would be a very positive development that would catch a lot of people offside. Now, I know a lot of people are going to say, "Look, if they're hedging a lot, that means they have a lot to hedge, right?" That means they have a lot of bullish exposure. Well, yeah, that's that's most likely the case here, right? But that's always been the case. You don't you don't hedge a portfolio when you're not long on the other side of it. That's why this historical precedence, I think, still works very well. Right? Every time this chart has went up, it's kind of a red flag. But to the opposite, when Wall Street is super short the Nasdaq, it's actually when you want to be long the Nasdaq. So, I think the the end conclusion is positive either way you want to look at it. Now, I do want to share this clip with you again from CNBC. Stephanie Link says expect markets to grind higher into the end of the year. So, take a listen. >> uh some of things coming out of the administration as well from over the weekend. Uh but and then we've also been talking about some of the earnings we're going to hear uh later this week. How are you positioning yourself in this particular moment? >> Yeah, and that's great to be here, Andrew. I Look, I think that even though we took a breather last week in the markets, the economy is still chugging along. The Atlanta Fed tracker for the quarter is running at 5.8% for GDP. I don't think we're growing that fast, Andrew, but I do think we directionally we're we're accelerating from last quarter. And it it is just because of AI in the food chain. We heard from Cisco and Applied Materials and CoreWeave and Supermicro last week. So, that's still working. And the consumer is still actually consuming. And I think you're going to get some really good reports minus the housing cycle and stocks. But I think you're going to see very good numbers from Walmart and from Target, as you guys were just talking about. But when I when I listen to what the banks have said, they are talking about a very strong consumer. And that even the low end is starting to do a little bit better. They're lending at about 8 to 10% growth. That's very healthy. We have ISM services that are up 20 consecutive months in a row. Retail sales, if you average the last 2 months because we did have the pull in from Prime Day at Amazon, you're running like 5 to 6%. So, I feel good. Earnings are really growing rapidly. I don't think we're going to see 50% growth forever, but we are seeing a lot of momentum. I am encouraged with not only revenues growing double digits, but also gross margins expanding. And oh, by the way, we're on pace to do $4 trillion in M&A this year, which would be a new record. >> So, you know, it's it's funny. We we constantly talk about all these big geopolitical headlines. This morning, North Korea being one of them. We talk about wealth taxes in California. We talk about what's happening in the Middle East with with Iran. And oil prices. Um and and yet things continue a pace. Should Should Is there Is there an argument to to say that things are so strong that we just should look away from the other stuff? >> Well, I think the fundamentals are really strong. And I think not only are earnings good, but they're very broad-based. 10 out of 11 sectors saw uh growth last quarter this past quarter. Um seven out of 11 saw double-digit growth. So, I don't think you want to fight the economic momentum. And I know, you know, there are a lot of things to worry about in terms of all the things that you mentioned. It's never perfect. And you know, I worry when I don't worry because that means we're all complacent. But, the underlying fundamentals are so strong. Um I think you want to continue to be fully invested. I think you want to be diversified. I love that we're broadening out and not just seeing it in technology. Uh and I think we grind higher into the end of the year because I think earnings may not grow at 50%, but they're still going to grow. I think 20 >> What do you think on the tech side? We were talking in the last hour about um Berkshire Hathaway's uh investment in Alphabet. Uh we're going to have Greg Brockman uh who's one of the founders of OpenAI on the broadcast at right 8:30 this morning. Uh obviously we got into a whole I don't know if you were watching a a a debate or interesting conversation about what's going on in the bond market as it relates to some of the financing for some of these data centers. But, um if you already owned I mean, this is a big question for a lot of people who own who have owned the Magnificent Seven, uh do you stay in them? >> No. I like some of the Magnificent Seven. I think Amazon is the best positioned because I think they can win in very very many ways. Obviously, AWS and seeing an acceleration to 38% growth from uh from 20 27% growth of quarter before. Um that's really good. You I think retail sales are running uh the businesses are running about 9% comps. Margins are expanding. So, I like I like Amazon. Um I I do like some of the techs that like some of the news uh newer mag sevens if you want to call Micron in there. I recently bought that down 20% from its highs with a hundred billion dollars of bookings between now and the end of the year. I recently bought Nvidia for the first time. You know, I've been a big fan of Broadcom, but Nvidia is the cheapest it's been since 2019 and they're growing like gangbusters, like 85% revenue growth, margins are 75%. They're going to double free cash flow. And I also bought SpaceX and I have been buying SpaceX. I bought it out in in during the IPO and it's pulled back about 30%. They had a great quarter and I think given the CapEx numbers are going higher, but the company talked about seeing monetization within a year. So, I'm all right with them spending 65% growth in CapEx. So, I think there's plenty to do in technology, but I also like other areas as well, financials, industrials. We've talked about a lot of the food chain names. >> guys do know, my perspective personally, again, I think there's going to be a lot of volatility between now and the midterms. I think after the midterms, we are going to start one of the strongest um directional rallies we have seen in a very long time. By then, we should have a lot of clarity on the Fed, on inflation. I don't think we're going to get rate hikes. I think by then, the Iranian conflict is hopefully over with. You get the midterm election event risk out of the way. There's going to be a lot of unwinding of hedges, which is going to, I believe, drive the markets higher. Again, I don't think AI hardware is going to lead the markets. I don't think the FOMO is coming back. Some of them could do well, right? I'm bullish on Qualcomm, Marvell, AMD and you know, there's probably others that could also do well, but it's going to look more normal right? There There was a time a couple of months ago where AI hardware was going up basically every day and every week and the rest of the markets were dying. That was because of FOMO, because of chasing. And I don't think we're going back into that environment. I think we're actually transitioning into a new AI trade, which is robotics, automation, AI software, and cybersecurity. And it doesn't look obvious to a lot of people today, but I think 6 months from now, 12 months from now, a lot of those stocks are going to double, triple, or more. And I think that's where aggressive, you know, um investors should be positioning. But I also like industrials, cyclicals, small caps because they benefit more if I'm correct. If I'm correct, midterms come around, that that problem is solved from a seasonal perspective, from a volatility perspective, hedging perspective. If the Iran war ends and we don't get rate hikes, cyclicals, industrials, small caps, even software and hyperscalers could actually do well in that environment. I don't know how much it actually changes the AI trade. Like, sure, it's a positive, but I don't think it really helps hardware stocks. I don't know if it helps Mag 7 either as much, but if treasuries come down, they have to raise a lot of debt, that could help them a little bit, but the bigger winners are going to be the new AI trade. Again, robotics, automation, AI software, and cybersecurity. Okay? And then, uh cyclicals, small caps, industrials, things that are tied to the real economy, tied to lending, treasury yields would fall in that, um, environment, right? If we don't get rate hikes. So, I think, again, like Stephanie Link said, there's a lot to do in this market, but you want to be looking out and positioning for after the midterms. I don't really care what happens between now and the midterms. I'm positioning for the post-midterm rally at this stage. So, those are my thoughts. Let me know your thoughts on this down below in the comments section. Hit the like button. Subscribe to the channel if you guys have not done so already. Check out the free course. Again, first two lessons just dropped on the Patreon. If you guys again want to come trade and invest alongside of us as well, that link is down below in the description of today's episode. Have a great rest of your day, and I will see you in the next one.