If This Is a Top, Where Are All The Investors?

1.)  SENTIMENT – The National Association of Active Investment Managers (NAAIM) publishes its weekly Exposure Index, a measure of how much equity exposure professional managers are actually running.  Not what they're saying, but what they're actually doing.  This week that number came in at 74.93, which is the lowest reading since last May.  So let's line up the facts:

• The equal-weighted S&P 500 recently hit all-time highs;

• The advance-decline line is at new highs;

• Small caps, mid-caps, and transports are breaking out; and

• Global stocks are trending higher; and

• Active managers are reducing their exposure.

That last one isn’t excess optimism…that's skepticism!  That's cash on the sidelines that can, and often does, act as fuel.  The bottom line is that a market top followed by a sustained bear market doesn't usually start with expanding participation and underinvested managers.  Sustained bear markets usually start with euphoria and full positioning.

2.)  OIL – Commodities are on investors’ minds, especially oil after the attacks in Iran and surrounding middle East Countries. The WWIII chatter will probably be loud.  Historically speaking, there tends to be a sequence of things in markets, especially the commodities markets.  Gold is the monetary metal, and it tends to move first as it identifies liquidity before the economy feels it.  When gold breaks out, it’s telling you capital is leaving paper and moving into hard assets.  Then copper moves.  Copper has been moving higher for almost the past 30 weeks now, whereas Gold has been trending higher since MAR 2024.  Then, after that, oil tends to move last.  You need energy to dig gold and copper out of the ground, refine them, transport them, and build things that use them.  Diesel for machinery and industrial processes and gasoline for transport.  The final stage of the commodity cycle is energy demand overwhelming supply.  Right now, the average gasoline price just peaked above $2 (excluding taxes, transit, overhead, and margin) in every single state for the first time in 2026.  Politically and psychologically, that level was supposed to hold…but it didn’t.  Every pro-supply headline and every political speech should have pressured crude lower.  And then we got the Venezuela news.  That’s the kind of headline that would normally devastate prices if the market is weak.  It didn’t.  Instead, oil reversed.  That’s a news failure event.  If oil won’t go down on maximum bearish news, it’s not likely going down in the intermediate term.  If Oil (WTIC) breaks above $68 and holds (holding is the key)…a run towards $90 would not be surprising.

3.) VIX – Traders are responding to the doom and gloom of yet another war in the Middle East as VIX is up over 18% to 23.47. If you think about it, a VIX at just 23 isn't that huge of a spike if the world is coming to an end. So is the war already over? No, probably not. But by the time the news says “it’s over,” markets will already reflect it - equities higher, oil lower, volatility crushed. When it’s truly over, you’ll see it clearly in the market. VIX below 23. Oil below $75. You won’t need a headline to tell you. Price will tell you. Internal indicators suggest we see VIX lower in the coming days.

• Going into Friday's close, our models positioned for defense... Great White (aggressive model) is net short, meaning it benefits if markets are down, and Tiger reduced domestic equity exposure to just 17%. This situation in Iran does not have a negative impact on us today.