DC Lite #486

1. Financial conditions. "If we look at the long-term history of the Z-score of FCI, we see that at +/-2sd it tends to signal a turning point…and this is exactly what we’ve seen over recent weeks with a tightening of ~40bps in FCI, driven by a combination of the policy factor (rates) and risk assets (equities lower, credit wider)."

2. GLD flows. "From record inflows to extreme outflows. Retail sentiment toward gold has normalized...Gold bottom for this correction is in or close."

3. Hedge fund trading flow. "Trading flows diverged within US Consumers [last] week, as US Consumer Discretionary saw the largest $ net buying in ~2 years, while US Staples saw the largest $ net selling in 15 months."

4. SPXU volume. "On Friday, more than $1 billion of $SPXU were transacted. (SPXU is -3x short S&P 500 ETF) Past spikes marked major bottoms: 1. COVID bottom, 2. 2022 bear market's first wave bottom, 3. October 2022 (bear market bottom), 4. April 2025 (Liberation Day bottom) 5. Now"

5. Short interest. "The median short interest in S&P 500 stocks remains surprisingly high after such a powerful rally. At the equivalent of 2.4 per cent of overall market capitalisation, shorting is at the 99th percentile relative to the past five years, and well above the long term average since 1995."

ICYMI