Historically This Has Signaled A Short Term Pullback

Goldman Sachs trader Cullen Morgan warns that US equity sentiment and technical indicators have reached multi-year extremes, suggesting a short-term pullback is likely. He recommends various hedging strategies, including SPY puts and SMH put spreads, to protect against potential downside.

Key Takeaways

• 1.Risk appetite is at its highest level in over five years, signaling extreme market sentiment.
• 2.A rare positive correlation between NDX spot and 1m upside volatility historically precedes short-term market pullbacks.
• 3.Technical indicators for the Nasdaq-100 are stretched, with RSI hitting 83 and the index trading 15% above its 100-day moving average.

Table of Contents

• Sentiment and Risk Appetite Indicators
• Volatility Market and NDX Correlation
• Historical Forward Returns Analysis
• Technical Extensions and RSI
• Hedging Recommendations

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