By Anna Peel. Originally published at ValueWalk.
According to the latest data from JPM Prime, one of the largest custodians of hedge fund assets, hedge funds have been net selling in 8 of the past 9 days. In other words, they have been selling the rally.
And who were they selling to?
Q4 2021 hedge fund letters, conferences and more
Power To The People
Retail investors, mostly. The second factor that could power equities higher is that retail participation has dramatically increased of late after nursing their losses on the sidelines for a while. Home office traders are buying weekly calls again.
Evidence? Other than flows, plenty of retail “fingerprints” in the market: +50% moves in GameStop Corp. (NYSE:GME), and huge gains in core retail favorites, Tesla Inc (NASDAQ:TSLA) / NVIDIA Corporation (NASDAQ:NVDA).
That’s not all. Goldman strategists remind us there is still a lot of quant fund buying in the pipeline, too. According to the Goldman desk, at least $46 billion is yet to come. This is a sweetener on top of the massive corporate buyback flows we already wrote about: $319 billion have already been authorised this year, and the total is expected to top $1 trillion for the year.
All of this buying will run into a market that might be ill-positioned for a rally. About $3.5 trillion of option notional rolled off a couple of weeks ago and the Street is said to be short – very short – gamma.
Don’t Forget The Technicals
Lest we forget, we are data people. And historical analysis suggests April is seasonally a strong month: over the last 10 years, the average return in April was second only to November (pre-Santa buying), clocking in at 2.3% per month.
Buckle your seatbelts!
Updated on
Sign up for ValueWalk’s free newsletter here.
