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Market Report: A Pullback That's Largely Driven By Tech And Growth Stocks

Mar. 08, 2021 12:13 PM ETSPDR® S&P 500 ETF Trust (SPY)7 Comments
Fundamental Capital profile picture
Fundamental Capital


  • Last week saw a wide divergence in the stock market.
  • Sectors that exploded higher after March 2020 (e.g. tech, IPOs, growth stocks) saw sharp drawdowns while sectors that lagged significantly are catching up.
  • Here are the top indicators and charts to pay attention to right now.

Last week saw a wide divergence in the stock market. Sectors that exploded higher after March 2020 (e.g. tech, IPOs, growth stocks) saw sharp drawdowns while sectors that lagged significantly (e.g. energy & finance) are catching up. In this Market Report I will highlight a few indicators that matter right now. But more importantly, I’ll discuss how we’re investing & trading in this environment because at the end of the day, the only thing that matters is how you’re positioned. Everything else is just noise.


Sentiment is not displaying excessive pessimism despite the recent selloff. Here’s the NASDAQ Daily Sentiment Index:

Now of course, sentiment doesn’t need to fall to extremely low readings for markets to bottom. Sentiment is mostly just a function of price. Markets bottomed last October on sentiment that wasn’t much lower than today.

Insider Buy/Sell

There’s been a slight uptick in corporate insider buying recently as stocks pullback. Past market bottoms saw a higher insider buy/sell ratio, so this could be a sign that the pullback/correction isn’t yet over.

Source: BullMarkets.co

Relative Gamma Exposure

Relative Gamma Exposure (Gamma Exposure divided by the S&P 500’s value) plunged to a record low.

Source: SqueezeMetrics

Historically, such low Relative Gamma Exposure was a bullish sign for stocks over the next 3 months:

USD rally

Stocks and the dollar have been inversely correlated over the past year, so it’s no surprise that the U.S. Dollar is rallying right now as stocks pullback. There’s been a slight uptick in large speculator positioning towards the Dollar. The dollar will rally higher if stocks fall further. This matters for funds like ours that invest in UK private assets.

Source: Bloomberg

Fund flows

The recent pullback in stocks has been accompanied by strong fund flows into S&P 500 ETFs. The last time this happened

This article was written by

Fundamental Capital profile picture
I'm a professional trader who uses quantitative models to consistently outperform in the stock market by:1. Combining fundamental analysis with technical analysis.2. Predicting and avoiding "bear markets" and "big corrections". I provide quantitative market research at BullMarkets

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

jprizzuto profile picture
so NOT true... "at the end of the day, the only thing that matters is how you’re positioned"

as every trader knows, at the end of the day, the absolutely ONLY thing that matters is whether you made money!!!
Think Long Term profile picture
I bet when the stimulus vote passes tomorrow in the House, we will see a ramp up job like no one has seen before....basically SPY index is flat for the year...you gotta think they are going to pump this over 400 tomorrow on a passing vote
Tech and Growth equity shares have been like a yo-yo, going way down, then way up, except mostly it's doing 3 way down days for every way up day. The narrative about rising interest rates hurting these T&G businesses but almost nothing else is a canard in my view. That narrative is coordinated with the endlessly repeated "rotation" narrative in the financial media. It seems to be a ploy and conspiracy to drive prices down and cause huge volatility in T&G to create great buying opportunities for the co-conspirators . And it's working. The growth/disruption opportunity in T&G just doesn't hardly exist anywhere else unless politicians are forcing huge tax credits picking winners and losers as in the Green energy space. Today's strong bounce (so far) seems to bear this out.
Daniel-san profile picture
I've been reading that we're going to see a 10-15% correction for the last 11% down (much more for some stocks). I'm curious why articles like this one don't take into account the drop we've *already* experienced, and then clarify your proclamations about a drop. Otherwise, the "~15% correction" you've stated would actually be a "~26-30% correction" if we included the ~11% drop (NASDAQ, which is now officially in correction territory) that we have *already* seen.
j. hughes profile picture
@Fundamental Capital
You mirrored my investment strategy.
What little I have in stock is hedged and I am presently negotiating the purchase of rental properties in the ski industry. The season is ending and, during the lockdown, due to COVID, this past season has not been great. With the vaccines things should bick up and mortgages are still cheap. If rates go up, I have the cash.
Nice article and graphics. Makes sense to me. Private debt equity sounds like a good place to wait this out. Thanks.
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