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Hey, it's Garret here. |
You think you're diversified in the S&P 500? |
You're not. |
You're making a leveraged bet on 10 companies. |
And when this thing unwinds, it's going to hurt. |
Here's the math that should terrify every index investor: Nvidia represents 7.7% of the S&P 500. Microsoft is 6.9%. Apple is 6.3%. When you add up the top 10 holdings, you get 37% of the entire index. |
That's not diversification. That's concentration risk disguised as broad market exposure. |
These aren't just big companies sitting passively in your index fund. These are the exact names hedge funds use for leverage strategies. The most liquid stocks. The easiest to borrow against. The fastest to dump when things go sideways. |
"These are the very highly liquid names that are utilized for leverage strategies by hedge funds," I explained during this morning's Market Masters session. "And when this stuff unwinds, the market can and will go down very quickly." |
We saw this playbook in February. We saw it again in the March-to-April collapse. The selling starts with the mega-caps because that's where the leverage lives. |
The Signal Everyone's Missing: FNGD |
While everyone's obsessing over jobs reports and Fed meetings, I'm watching something most traders don't even know exists: the FNGD. |
This is a leveraged inverse ETN for FANG stocks. When FNGD starts moving higher, it's signaling de-leveraging in those top 10 names. It's the canary in the coal mine for concentration risk. |
"If we break above that 50 day moving average on the FNGD, that's where we start playing a lot more defense," I told the room this morning. That's your early warning system. |
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The momentum indicator I track shows negative 10 - more stocks breaking down than breaking out across the S&P 500. But here's the kicker: when you have 37% of the index concentrated in 10 names, those individual stock moves get amplified across the entire market. |
As goes Nvidia, so goes Apple, so goes the rest of the market. And when hedge funds start dumping corporate debt and unwinding leverage positions, it creates a cascade effect through these exact names. |
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The April Warning Shot |
Remember what happened in April? We had that sharp selloff, and instead of the typical flight to safe havens, something weird happened. The dollar didn't surge like it usually does during market stress. |
But here's what did happen: massive de-leveraging through these mega-cap names. The same concentration risk we're sitting on right now, just waiting for the next trigger. |
Stop pretending your S&P 500 position is diversified. Start treating it like the concentrated bet it actually is. |
Watch the FNGD for early warning signals. When it breaks above that 50-day moving average, that's your cue to start playing defense. |
Consider selling calls on existing positions. Look at sectors that aren't tied to this concentration risk - areas where money might rotate when the mega-cap unwind begins. |
The Uncomfortable Truth |
Your index fund sold you the idea of broad market exposure. What you actually bought is a leveraged bet on the same 10 companies that every hedge fund is using for their strategies. |
When those strategies unwind - not if, when - your "diversified" portfolio is going to feel a lot more concentrated than you expected. |
The market can stay concentrated longer than you think. But when the unwind starts, it happens faster than most people can react. |
Don't be the exit liquidity when hedge funds decide it's time to de-leverage. Watch the signals. Know what you actually own. |
Because calling it diversification doesn't make it true. |
I'll be live with you tomorrow in the pre-market dropping more knowledge. |
It's free to attend, use this link to RSVP. |
Stay Positive, |
Garrett Baldwin |
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ICYMI | | This Former TD Ameritrade Executive Just Exposed Wall Street's Biggest Secret | "Shadow Clocks" - The Hidden Timers That Print Money While You Sleep | Watch the shocking replay where Don Kaufman reveals: | ✓ Why the VXX dropped 90% (and how to profit from the OTHER side)
✓ The "certainty trade" hedge funds use to never lose
✓ How $2,000 accounts can copy $23 billion strategies
✓ The ONE thing in markets that's 100% predictable | This isn't about timing volatility spikes.
It's about profiting as volatility DECAYS. | And decay is guaranteed. | Time moves forward. Volatility dies. Money flows from retail to pros. | Unless you know about the Shadow Clocks. | | Goal: Double your money in 12 months
Strategy: Trade time itself
Risk: Controlled and hedged | Don helped build ThinkOrSwim. Managed systems for 7 million traders. | And he's never shared this publicly before. | The clocks are ticking.
Choose your side. |
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Why I'm Betting BIG on Banks Before September Rate Cuts (4:1 Reward!) | Blake Young just revealed his highest-conviction financial sector plays before the Fed's September rate cuts—including a specific KRE trade setup with 4:1 reward-to-risk ratio and $6 upside potential. | Watch him break down why this could be the "last hurrah" for consumer finance, which big banks are primed for 3-10% moves, and the exact price targets he's watching. | Don't miss his contrarian utilities call that could save you from major losses. | |
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