One More Rally To End 2022

High level of bearish bets right now. Read more to see why we think there will be a Christmas Rally of sorts as we enter 2023.

One More Rally To End 2022

Dec. 23, 2022 2:54 AM ETACTV, AFMC, AFSM, ARKK, AVUV, BAPR, BAUG, BBMC, BBSC, BFOR, BFTR, BJUL, BJUN, BKMC, BKSE, BMAR, BMAY, BOCT, BOSS, BOUT, BUFF, BUL, CALF, CATH, CBSE, CSA, CSB, CSD, CSF, CSML, CSTNL, CWS, CZA, DDIV, DEEP, DES, DEUS, DFAS, DGRS, DIA, DIV, DJD, DON, DSPC, DVLU, DWAS, DWMC, EES, EFIV, EPS, EQAL, ESML, ETHO, EWMC, EWSC, EZM, FAB, FAD, FDM, FFTY, FLQM, FLQS, FNDA, FNK, FNX, FNY, FOVL, FRTY, FSMD, FTA, FTDS, FYC, FYT, FYX, GLRY, GSSC, HAIL, HIBL, HIBS, HLGE, HOMZ, HSMV, IJH, IJJ, IJK, IJR, IJS, IJT, IMCB, IMCG, IMCV, IPO, ISCB, ISCG, ISCV, ISMD, IUSS, IVDG, IVE, IVOG, IVOO, IVOV, IVV, IVW, IWC, IWM, IWN, IWO, IWP, IWR, IWS, IYY, JDIV, JHMM, JHSC, JPME, JPSE, JSMD, JSML, KAPR, KJAN, KJUL, KNG, KOMP, KSCD, LSAT, MDY, MDYG, MDYV, MGMT, MID, MIDE, NAPR, NJAN, NOBL, NUMG, NUMV, NUSC, NVQ, OMFS, ONEO, ONEQ, ONEV, ONEY, OSCV, OUSM, OVS, PAMC, PAPR, PAUG, PBP, PBSM, PEXL, PEY, PJAN, PJUN, PLTL, PRFZ, PSC, PTMC, PUTW, PWC, PY, QDIV, QMOM, QQC, QQD, QQEW, QQQ, QQQA, QQQE, QQQJ, QQQM, QQQN, QQXT, QTEC, QVAL, QVML, QVMM, QVMS, QYLD, QYLG, REGL, RFG, RFV, RNMC, RNSC, ROSC, RPG, RPV, RSP, RVRS, RWJ, RWK, RWL, RYARX, RYJ, RYT, RZG, RZVSentiment continues to show some of the most bearish readings we've seen since the 2022 bear market began.There is a high level of bearish bets right now, and these will likely need to unwind if we are going lower.We believe the biggest risk that investors face going into 2023 is thinking they know what will happen and not considering there is more than one possibility.Looking for more investing ideas like this one? Get them exclusively at Tech Insider Network. Learn More >> cemagraphics Sentiment continues to show some of the most bearish readings we've seen since the 2022 bear market began.

The AAII, which is a survey that asks investors if they are bullish, neutral or bearish 6 months out, just gave us the lowest reading of bulls since the October low. Recently, only 24% of those surveyed are expecting bullish results over the next 6 months. Compared with the March low in 2009, this is not too far off that reading, which came in at around 19%.

I/O Fund When we look at the options market, we are seeing a similar rare pattern that has only occurred two times in the last 16 years. This is when we see an outsized ratio of puts being bought while the market is in an uptrend. I/O Fund Regarding the put/call ratio, any reading over one signals that more puts are being bought over calls.

A reading over 1.1 is reasonably rare, which I would consider a fear spike. What you'll notice is that fear spikes occur mostly in downtrends, and culminate around the lows. The tan regions show multiple fear spikes occurring while the market is in an uptrend (2013, 2017, 2022).

Each instance prior saw higher stock prices before a correction began. Rarely do we see the market rewarding a crowded trade. Even when that trade makes the most sense.

In order for a setup to go lower, we need to see sentiment reset. There is a high level of bearish bets right now, and these will likely need to unwind if we are going lower. We have been raising large sums of cash throughout late November/early December in preparation for a volatile month.

The volatility has only increased the number of bearish bets in the market as many stocks approach oversold conditions again. We believe that the market is setting up for another rally, which should last through early January. Whether we drop to new lows, or continue higher is yet to be seen.

There are some markets in the US and abroad that have clean setups to new highs. This would certainly be the contrarian perspective going into 2023, which is worth acknowledging. However, the global central banks went on an aggressive rate hiking campaign while shifting global trade dynamics are exacerbating inflationary pressures worldwide.

This is happening while we are experiencing drastic decelerations in key tech sectors, which we discussed here. So, we are not married to a thesis, and are ready to shift in either direction once we get clear signals. We believe the biggest risk that investors face going into 2023 is thinking they know what will happen and not considering there is more than one possibility.

In conclusion, we believe there will be a Christmas Rally of sorts as the probability favors a move higher as we enter 2023 into the first couple of weeks of January. Both the market internals and sentiment have reached a level of bearishness that rarely leads to a prolonged drop. Look for this to reset before we go lower.

Regarding the long-term narrative, instead of leaning into a thesis, we prefer to let price action determine whether we hedge, or leverage our portfolio to the long side. This neutral stance has been rewarding for us as an all-tech portfolio. As of now, we are leading our all-tech peers and our audited results will be out in Q1 of 2023.Our weekly reports are 10-20-page deep dives on individual stocks.

In the past years, our free analysis predicted Roku's meteoric rise, Zoom's IPO success, Nvidia's sustained growth, Bitcoin's rise, and more. My paid service has done much more.In 2021, we predicted many 100%+ gains across cloud software, semiconductors, and bitcoin.Give your tech portfolio an edge. Learn more.

This article was written byAuthor of Tech Insider NetworkHigh conviction analysis to give your tech portfolio a competitive edgeKnox Ridley is the Portfolio Manager for Tech Insider Network and I/O Fund with cumulative audited results of 141%, beating Ark and other leading active tech funds over four audit periods in 2020 and 2021.No matter where you are in your investing journey, Tech Insider Network has the plan for you. For weekly stock updates and monthly stock picks, join our Essentials plan. If you're looking to take your investing to the next level and receive real-time trade notifications, a fully transparent portfolio, weekly webinars with our portfolio manager, and more, learn about our Advanced plan. Knox Ridley began consulting on portfolios in 2007 and is an experienced growth investor in both bull and bear markets, which is hard to find these days.

His real-time trade notifications to premium subscribers have garnered 27 entries with over 100% gains in the last two years. Knox began his career as an ETF wholesaler in 2007 before becoming a portfolio consultant for large RIAs, FAs, and Institutional accounts. He is very keen on macro trends and is trained in Fibonacci Trading, Elliott Wave theory, as well as Gann Cycles.

He also uses classical technical analysis to manage risk and identify great risk/reward setups. Knox is known for increasing and decreasing allocations for record-breaking returns.After weathering the Great Financial Crisis, Knox is especially strong in risk management. This helps Premium Members at the I/O Fund participate in the upside of tech stocks while protecting themselves on the downside.

For decades, Knox has seen the inexperienced gain large amounts and then lose large amounts. He is diligent in dedicating this time to share what he knows about risk management on the forum, through real-time trade notifications and in weekly webinars. You will not find a more grounded and accessible portfolio manager who is willing to share his daily moves as he seeks to beat Wall Street for years to come.

The I/O Fund officially launched on May 8th, 2020 and his portfolio performance illustrates his ability to compete with the best Funds on Wall Street. Case studies on how the I/O Fund approaches tech investing: (1) we covered Datadog in January 2020 for I/O Fund Members. The I/O Fund built a position quickly in April of 2020 with prices depressed from the COVID crash and did not budge on the thesis that this is the best way to play cloud infrastructure. We have added strategically throughout the years, and it is now a core position in our portfolio.

It is up over 100% in our portfolio. (2) In early 2021 we identified a fast growing Productivity SaaS company called Asana. What intrigued us was how low the valuation was coupled with the technical setup.

After holding the company for most of 2021, we sold it for a 286% profit. Asan became the best performing cloud stock in 2021. (3) We identified Bitcoin in 2019 with a target entry around $7,000.

We were able to sell half our position for an average 400% in early 2021. We've been strategically adding back because we believe it has one more run in it..

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.Comment