The Reformed Broker: Short Sellers Take Over

The stock market turned on a dime last week following the hawkish speech from Federal Reserve Chairman Jerome Powell. Now, investors are largely betting on a decline in the market in the coming weeks.

The trend is clear, based on futures activity. Interest on the short side for S&P 500 futures – betting on a lower market – reached their highest since the summer of 2020. While that may not guarantee the market moving lower from here, it’s a strong trend.

And it could prove self-fulfilling. If investors expect stocks to trend lower, they’ll refrain from buying shares. And a lack of buying interest could lead stocks lower.

In the meantime, with markets getting bearish, we’re also seeing markets in disarray by the return of meme stock trading. Bed Bath & Beyond (BBBY) has been either the best or worst performing stock in the market depending on the day.

The big swings make it difficult to truly value the retail chain. While there are some merits behind the company, wild swings in value can make it look too risky for investors – even if it proves to be safe.

Finally, on a technical level, stocks came off their June lows. Then the markets hit the 200-day moving average and started to trend lower again. That’s a bearish sign, and that it can take months for the market to work through the current issues plaguing it, such as inflation.

To watch the full show outlining the bearish market trend now, click here.