DC Lite #509

1. Oil positioning. "I've been bearish and have argued that stretched positioning is not enough to flip bullish. However, MM short positioning is now at a multi-decade high and the negative sentiment surrounding the VZ developments is overblown. Will be watching for bottom signals in Q1."

2. GLD skew. "Gold positioning has become a lot more defensive leading up to this weekend’s events, with GLD 1M skew steepening to the 80th percentile high on the back of increased demand for puts. For the first time since May, GLD puts are now trading at parity with calls suggesting traders see equal downside risk as upside potential for gold in the near-term."

3. Animal spirits. "Typically, when stocks signifying an awakening of animal spirit behaviors begin leading the stock market, it’s often a signal of a new bull market."

4. Valuation. "Valuations: high but not as high as you might think ... You might think the slope of the curve is too steep, and maybe it is; but just looking at higher valuations in isolation misses the extraordinarily high profit margins of the tech sector vs the rest of the market."

5. Profit-adjusted valuation. "Using our profitability-adjusted model, today’s P/E comes out to about 16.6x, just a touch higher from its 20-year average of 16.2x."

ICYMI