“Does Yesterday’s Selloff Have Legs?” – Morgan Stanley Answers

Does yesterday’s modest – if sharp – selloff in stocks have legs? That is the question Morgan Stanley’s Institutional Equity Division director Chris Metli asks in a note to clients overnight. As Metli writes, the moves have been exacerbated by the lack of protection investors have on and their rising equity exposures over the last month.
The below charts update the positioning in options and futures that QDS noted two weeks ago – in general investors have continued to get more bullish. Meanwhile, as MS Equity Strategist Mike Wilson has noted 3Q earnings are now largely in the price and with the SPX rally overextended, earnings season should be a ‘sell the news’ event as there is “greater risk for a correction than we’ve seen in a while“.

This post was published at Zero Hedge on Oct 26, 2017.