I am usually long-only and either hedging or exiting the market during times of volatility and using a rules-based semi-passive strategy, so taking an outright short position is unusual for me. Posting it publicly to see how it'll pan out.
Main thesis is that:
1) The bull case for the QQQ over the past decade is largely based on momentum rather than growth. Most of the outperformance vs the SPY is based on expanding PE's. This is fine, a momentum trend can last for a long time.
2) Looking at a log chart, we are currently at the top of the 10-year channel and above the top of the multi-decade channel. This limits short term risk exposure unless you assume that the QQQ will go outright parabolic.
3) Considering that we are likely to see continued negative earnings growth due to the coronavirus recession over the next few quarters, a number of other bad medium-term macro factors for tech such as the ending of the H-1B program, and a widespread sentiment that this is a bear market rally, I am assuming that the worst case scenario in 2) is unlikely.
4) With VIX ETN's getting delisted and bonds at extremely low yields, there are very few hedges left, so long/short positions are becoming increasingly attractive.
As such, betting on a mean reversion of tech over the next couple of months should be relatively safe. Hedging it with long exposure to other US equities.
Main thesis is that:
1) The bull case for the QQQ over the past decade is largely based on momentum rather than growth. Most of the outperformance vs the SPY is based on expanding PE's. This is fine, a momentum trend can last for a long time.
2) Looking at a log chart, we are currently at the top of the 10-year channel and above the top of the multi-decade channel. This limits short term risk exposure unless you assume that the QQQ will go outright parabolic.
3) Considering that we are likely to see continued negative earnings growth due to the coronavirus recession over the next few quarters, a number of other bad medium-term macro factors for tech such as the ending of the H-1B program, and a widespread sentiment that this is a bear market rally, I am assuming that the worst case scenario in 2) is unlikely.
4) With VIX ETN's getting delisted and bonds at extremely low yields, there are very few hedges left, so long/short positions are becoming increasingly attractive.
As such, betting on a mean reversion of tech over the next couple of months should be relatively safe. Hedging it with long exposure to other US equities.