• Bull.




Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

Today’s bonus chart is the NAAIM (National Association of Active Investment Managers) Exposure Index, which measures the average exposure to US equity markets reported by NAAIM members. 

Reminder: Capital Preservation is a Position - msrtoday

We monitor this sentiment survey as it’s been a surprisingly reliable contrarian indicator of the equity markets. Like most market indicators, they are more attractive to us at extremes. For NAAIM, this means exposure to equities above 80% and below 40%.

The index currently sits at 77.95. On October 25th, the index was at 24.82 after being closer to 70% the week prior in a falling market. October 27th was the recent bottom for SPX. We will pay extra attention if the NAAIM index pushes toward 90-100% exposure in the coming weeks, coinciding with a market flip back to negative Gamma and systematic imminently poised to deleverage. NAAIM is not a trigger to be a bull or a bear; it is, however, consistently a leading contrarian indicator.

Yesterday, Liz Ann Saunders pointed out that interestingly, the American Association of Individual Investors, another sentiment survey, lowered equity exposure from 67 to 64.4 in the last few weeks. Commonly well correlated with NAAIM. While reducing equity exposure, 43.8% of voting members remain bullish on a 6-month time horizon; their historical average is 37.5%.

Bulls are out in force; bears are hibernating—a reminder to traders: capital preservation is a position. 

Learn more about the Market Situation Report written by Tier 1 Alpha.


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