Buy The Dip Or Short? Trader Reveals Key Signals | Jason Shapiro

Bitcoin

Across the shows: 24 speakers in other episodes, 22 bullish and 7 bearish calls, past 30 days

• Jason Shapiro · Crowded Market ReportBearish

  Bitcoin has done nothing since spot ETFs; positioning offers no edge as it tracks Nasdaq.

  He sees no major Bitcoin positioning edge right now and thinks Bitcoin is simply following the Nasdaq, though a bit weaker. He dismisses sentiment readings from crypto influencers as always bullish. He argues Bitcoin has gone nowhere since masses could invest through ETFs, so sentiment is not yet terrible. He would need forced selling, such as treasury-holding companies going bankrupt, before he saw a sentiment capitulation. He does not trade Bitcoin.

  “There's no big Bitcoin positioning edge right now. You're right in that. I think it's just following Nasdaq, although it's a little bit weaker.”at 21:51

Fartcoin

• Jason Shapiro · Crowded Market ReportBearish

  Fartcoin is worthless and falling; he won't take crypto seriously until it reaches zero.

  He says Fartcoin has no real use and has always been worth nothing. He says it has fallen from about $1.50 or $2 to around 10 cents, down about 90%, and that it is on its way to zero. He says that until altcoins like it clear out, he cannot take the broader crypto space seriously.

  “It's worth zero, and it's never been anything but worth zero, and it never will be anything but worth zero. So until that goes to zero, I can't take it seriously.”at 28:42

US stock market outlook

• Jason Shapiro · Crowded Market Report

  Current tech selloff rebound differs from past dips; buying the dip now offers worse risk-reward.

  Positioning data showed extreme long positioning in the Nasdaq six to seven weeks before the selloff, which led him to get short the Nasdaq. Past dips (COVID, the trade war, this summer) were panic-driven bubble-is-over moves, but now the consensus is to buy the dip and he sees money flowing into levered ETFs, so he thinks this dip is different. He says it is not a good risk-reward this time compared with previous dips, though his positioning view is not always right.

  “This one's different from my point of view because of the positioning thing and because I think that a lot of the consensus seems to be that you buy the dip here, and it was not during those other ones.”at 12:08

• Jason Shapiro · Crowded Market Report

  Money is rotating between Nasdaq and Dow, driven by rates; higher rates hurt the Dow more.

  He notes the Nasdaq and Dow have moved in opposite directions almost every day, which suggests money is staying in the market and rotating rather than leaving. He thinks this is driven by interest rates: higher rates hurt the Dow more than high-growth Nasdaq names, which he expects to shrug off a 25 basis point move. He notes that history can support either a good or a bad reading of such a move.

  “It's staying in the market. It's just rotating around. And it's probably based on, you know, rates. Interest rates go higher, that's worse for the Dow.”at 19:06

• Jason Shapiro · Crowded Market Report

  Bull market likely ended a month ago; regime is unclear after the rebound.

  He thought the bull market ended about a month before the interview because positioning was too bullish and market action turned poor. Stocks sold off even on better earnings, starting with Samsung. He defines a bull market as one that reacts well to good news and shrugs off bad news, and a bear market as the reverse. Recently, good earnings have lifted stocks again, so the tone has changed and he is now unsure which regime the market is in.

  “I didn't think that we were, David. I thought that the bull market ended a month or so ago because I didn't like the positioning. I thought the sentiment was too bullish.”at 31:19

Market sentiment, positioning & volatility

• Jason Shapiro · Crowded Market Report

  Panic selling is a buy signal: bull markets rebound right away, bear markets bring another wave.

  He says a retail panic-selling day would normally be a great sign, but his own indicators did not show panic selling. Robinhood data suggested retail was buying the dip, not selling it, so the two datasets conflict. Based on experience, in a bull market the market rebounds right away after a panic day, while in a bear market another leg down usually follows. He thinks the market was in a bear market for a while but is now unsure.

  “I would say in a bull market, the market rebounds right away after that type of stuff. And in a bear market, we end up seeing another wave that comes.”at 30:58

• Jason Shapiro · Crowded Market Report

  Stock market dip-buying is crowded: too many traders are buying every dip.

  Shapiro says the data he watches shows too many people buying dips in the stock market. He points to a shift in tone: after years of bubble talk, portfolio managers who had been calling it a bubble are now saying 'don't panic' and 'buy the dip'. He reads this as a sentiment change and does not see the mass consensus he would expect to see in a durable move. He argues the crowded dip-buying is a reason for caution, while acknowledging that he has been wrong before and could be wrong again.

  “The way I'm seeing the stock market right now from the data I look at is just way too many people buying dips.”at 39:20

Gold & precious metals

• Jason Shapiro · Crowded Market Report

  Metals positioning is finally becoming favorable after a long washout since early-year highs.

  Gold and silver have been out of favour since their early-year highs, and the long positioning that usually accompanies them has come off a lot. The metals are starting to set up on their own. He also links them to the dollar: heavy short positioning in the Aussie dollar and euro means a big dollar drop would be very bullish for metals. He is looking at entry points for this trade.

  “I'm starting to get a little excited about the metals. The positioning finally is starting to become a little bit more favorable.”at 35:16

US dollar

• Jason Shapiro · Crowded Market Report

  Record short positioning in the Aussie dollar and euro could produce a big dollar move.

  He says the Aussie dollar has the largest short positioning he can recall in history and the euro has the largest short positioning in ten years. He says positioning does not predict direction but sets up asymmetric payouts: if the dollar falls sharply, the move could be large, which he expects to be bullish for metals.

  “We have the largest short positioning, I think, in history in the Aussie dollar, for example. We have the largest short positioning in the euro in ten years.”at 36:03

US Treasuries & yields

• Jason Shapiro · Crowded Market Report

  Bonds will make a new low eventually, possibly six to eight months away, despite the recent rally.

  Shapiro has been bearish on bonds for a long time and says his indicators kept calling for bond weakness even at the early-October lows, which was a mistake. Bonds have rallied since, and he admits he was wrong to bottom-pick the TLT. He still does not like bonds at current levels and expects a new low at some point. He stresses that he was not short any bonds, so the miss did not cost him money. He gives a timeline of roughly six to eight months but notes that if he is right it could take quite a while.

  “I do think that they are going to make a new low at some point, but that some point could be, you know, six months away, eight months away.”at 39:58