After the Fed's interest rate meeting in September ended, the fear that federal funds interest rates had been high for a longer period caused the three major US stock indexes to fall to a low of nearly four months.Institutional statistics show that as medium- to long-term US bond yields rise, bears are increasing their positions in the derivatives market in a big way.

Looking ahead, in the context of seasonal weakness, the Fed's policy expectations and the resulting economic uncertainty are likely to be the trigger for further market fluctuations. Currently, there is a huge split in the market. Should we buy at bargain prices, or settle for safety?

Short positions are constantly increasing

According to data from Goldman Sachs Group's main brokerage business, hedge funds known as “fast money investors” or “smart money” increased their bearish bets. Last week, they reduced their net leverage ratio (a risk appetite measure for long and short positions) by 4.2 percentage points to 50.1%.It recorded the biggest weekly decline in portfolio leverage since the pandemic bear market in March 2020.

Coincidentally, the US Commodity Futures Trading Commission (CFTC) data also shows thatFollowing the announcement of the Federal Reserve's decision, speculators increased their CME net short positions in the S&P 500 index to 340,984 lots, an increase of nearly 30% over the previous month.

Citigroup strategists also said that investors are selling the NASDAQ 100 index, which is dominated by technology stocks, by establishing short positions in the futures market.

The team led by Chris Montague wrote in a report,The net short positions in the NASDAQ 100 index are currently $8.1 billion, and all long positions have been closed.In contrast, while S&P 500 futures also have a small amount of net short positions, there are still $15 billion of long positions unsettled.

Furthermore,Short hedge fund trades tracked by J.P. Morgan Chase increased; while Morgan Stanley's clients reduced net leverage at the fastest rate since October, increasing short positions in technology stocks, retail stocks, and the AI sector.

Shorting tech stocks reflects investors' growing concern that interest rates will remain high for longer. The Nasdaq 100 index reached its highest point during the year in July of this year, and surged more than 40% in the first seven months of this year.

However,The index has fallen more than 7% from its high point as investors realise that the Fed will not cut interest rates in the short term. The total market capitalization of the “Big Seven” US stocks has recently fallen all the way from the peak created in July to a low of nearly 4 months, and the total market capitalization has evaporated more than 1 trillion US dollars.As US bond yields continue to rise, it has affected the appeal of this overvalued industry.

Some analysts say that part of the reason is that profits have settled, and part is due to anxiety in the stock market, because the trend of higher long-term interest rates has indeed begun to take root. In addition, Futu News has also sorted out common reverse ETFs in the US stock market for bulls to refer to.

1. Shorting the S&P 500 Index

$Proshares shorted S&P 500 (SH.US) $: When the S&P 500 index falls by 1%, SH rises by 1%;

$S&P 500 twice shorted ETF-ProShares (SDS.US) $: When the S&P 500 index falls by 1%, SDS rises by 2%;

$ProShares tripled to short S&P 500 ETF (SPXU.US) $: When the S&P 500 index falls by 1%, SPXU rises by 3%.

2. Shorting the NASDAQ Index

$ Shorting the NASDAQ 100 Index ETF-ProShares (PSQ.US) $: When the NASDAQ falls by 1%, the PSQ rises by 1%;

$2x shorting the NASDAQ 100 Index ETF-ProShares (QID.US) $: When the NASDAQ falls by 1%, QID rises by 2%;

$ProShares Nasdaq Index shorted ETF by three times (SQQQ.US) $: When the NASDAQ falls 1%, SQQQ rises 3%.

3. Shorting the Dow Jones Index

$Dow ETF-ProShares shorting (DOG.US) $: When the Dow falls by 1%, the DOG rises by 1%;

$DXD ProShares doubles short the Dow Jones 30 Index ETF (DXD.US) $: When the Dow falls 1%, DXD rises by 2%;

$ProShares Dow triple shorted ETF (SDOW.US) $: When the Dow falls 1%, SDOW rises 3%.

Buying on dips? Wall Street's chance to shout has arrived

Despite recent adjustment pressure on US stocks, which has been rare since this year, Wall Street is still optimistic about the trend of the US stock market in the fourth quarter.

According to data compiled by MarketWatch, in the past two months, Wall Street investment banks have revised their expectations for the S&P 500 index at the end of 2023.Bank of America strategists even shouted: the more bearish the market is, the greater the rebound in US stocks at the end of the year.

It is worth noting that Nvidia's stock price, which is the driving force behind the rebound in US stocks this year, has fallen 15% so far in September. However, at a time when Nvidia was being sold off, Damo was optimistic,Investors who missed out on Nvidia this year will have an attractive buying point this month.According to the analyst,

Concerns about the sustainability of demand for Nvidia's artificial intelligence chips will soon be quashed by comments from the company's management or financial results, which means the stock provided an excellent buying opportunity after falling 15% in September (the biggest monthly decline in a year).

Furthermore, falling stock prices and rising profit expectations have brought Nvidia's valuation to its lowest level in nearly a year. According to the data, Nvidia's expected price-earnings ratio for the next 12 months is 28 times, only half of what it was in May this year, and lower than the stock's average of 32 times over the past 10 years.

Cow friends,

At a time when US stocks are falling,

Should I buy on bargains, fall out of pocket for safety, or follow the trend and go short?

Welcome to leave your thoughts in the comments area~

Editor/Somer