The Dow Jones Industrial Average!
That's right. The Dow is literally the most consensus net long position in all of macro. The Dow hit another intra-day all-time high today and Hedgeye CEO Keith McCullough signaled sell it in Real-Time Alerts.
One of the many reasons why is because there's a serious amount of bullish complacency and bearish capitulation embedded in this Dow long positioning. We track big bank and hedge fund contract positioning data from the CFTC.
We then measure and map the data on a Z-score basis to get a sense of how the net contract positioning compares against where it has been historically. Basically, this data tells you whether Wall Street is getting more bullish or bearish on the Dow (or any asset class for that matter) relative to positioning in the past.
Take a look at the chart below where the Dow is the most overextended of any other major asset in all of macro.
Here’s the set-up in the Dow
According to McCullough in the video below:
- The Dow hit the top end of our quantitative risk ranges
- Wall Street consensus is now more bullish on the Dow than any other major asset class, according to CFTC data on big bank/hedge fund positioning
- Based on our reading of positioning in futures and options markets, the Transports, which is a major component of the Dow, has an implied volatility discount (i.e. bulls are getting complacent and bears have capitulated).
Bottom line? Follow the data.