Short long and long short: leverage peak, extreme positioning and short-term rebound logic

As of November 21, 2025, multiple asset classes such as U.S. stocks, bonds, commodities, and cryptocurrencies are at a highly differentiated critical node.After the market experienced rapid adjustments in early and mid-November, there were clear signs of stopping last Friday (November 21). Some indexes have experienced technical rebounds, but the driving forces behind them are full of contradictions: on one side, extreme leverage short positions were squeezed out, CTAs were forced to cover, and retail investors fled in panic; on the other side, institutional cash allocations hit a 15-year low, leveraged ETF funds continued to flow in, and the defensive sector quietly led the gains.This structure of “stable on the surface but fragile on the inside” is a typical late cycle feature.

1. Today’s core number: 4

The “4” comes from the three-fold short S&P 500 ETF (SPXU, SQQQ, etc.) that was squeezed in a single day on November 21 (last Friday). The scale exceeded US$4 billion. This is the “4th” largest single-day leveraged inverse ETF fund liquidation event in history.The first three times occurred in:

• The bottom of the epidemic in March 2020

• On the eve of inflation peaking in October 2022

• October 2023 low

Historical data shows that after the liquidation of such extreme short positions, the S&P 500 rose 100% in the following month, with a median increase of 11.8% in three months.The scale of the current event is almost exactly the same as that in October 2022, so the probability of a short-term market rebound is extremely high.

2. Cash and leverage: the most dangerous combination in 15 years

Bank of America’s November Global Fund Manager Survey (FMS) shows:

• Global funds’ cash ratio fell to 3.7%, the lowest since 2010 and down from a peak of 4.0% in December 2021

• Stock positioning is at a net overweight of +38%, second only to January 2021

• Leverage usage survey index hits record high

At the same time, the total assets of 3x leveraged ETFs (TQQQ, SOXL, SPXL, etc.) have exceeded US$280 billion, doubling from the beginning of 2024.Historically, when the cash ratio is less than 4.0% and the size of leveraged ETFs increases by more than 80% year-on-year, the S&P 500 has a maximum median drawdown of 18.7% in the following six months.

3. CTA and gamma positioning: short-term buying has basically been released

According to Goldman Sachs’ latest CTA model (data as of November 24):

• Under any scenario (up, down, shock), CTA will remain “100% short” in the next week, with potential selling pressure of approximately US$180 billion (equivalent to 3.8% of the total market value of the S&P 500)

• There is currently no further forced buying, and new passive buying will only occur if a rapid decline in the index triggers a negative gamma flip.

This means that the rebound that started last Friday has basically consumed all “compulsory buying”, and subsequent rises need to be actively promoted by fundamentals or seasonal funds.

4. Technology and market breadth: short-term bullish but structural deterioration

1. S&P 500

• On November 21, it accurately touched the weekly 20-period moving average (about 5950 points), and at the same time touched multiple supports such as anchoring VWAP and Put Wall.

• Historical data shows that after the S&P 500 was above the 50-day moving average for more than the 138th trading day (currently the 142nd day), it rose 100% in the following three months (all samples since 1950)

• Key resistance: 6180–6200 (previous high + integer mark), after breakthrough, it can reach 6450–6500

2. Russell 2000

• It has broken through the downward trend line since February 2025 and reached a new high in November.

• Three consecutive positives + hammer line on the weekly line, which is a typical “bottoming out before the market” pattern

3. Nasdaq 100

• It is still in the downward channel at the weekly level and has not recovered the weekly 20-period moving average.

• Although SMH (semiconductor ETF) rebounded, it has not yet broken through the key dividing line of 0.52 (the watershed between long and short since 2023)

4. Market breadth improves but concentration worsens

• On November 24, 447 stocks rose vs. 55 stocks fell on the New York Stock Exchange. The single-day width was the best in the past three months.

• However, the weight of the top 10 largest S&P 500 stocks has risen to 38.7%, the highest since 1964, exceeding the 36% at the top of the Internet bubble in 2000

5. Sector rotation: Late cycle characteristics become increasingly obvious

The latest customer position data from Goldman Sachs Prime Brokerage shows (as of November 21):

• Institutions have significantly reduced their holdings in consumption discretionary (-2.1 standard deviations) and technology (-1.8 standard deviations) in the past four weeks.

• Also add positions in Healthcare (+2.3 standard deviations), Utilities (+1.9), and Energy Services (+1.7)

• Defensive sector vs cyclical sector ratio rises to highest since September 2022

This is completely consistent with the typical capital behavior during the “peak of economic growth” stage.

6. Bond market alert: Credit spreads are beginning to widen

• High yield bond credit spreads (HY OAS) have rebounded from 320bps in October to 385bps (November 24)

• Investment grade credit spreads (CDX IG) widened 15bps simultaneously

• Private credit spreads (Cliffwater Index) widened for four consecutive weeks for the first time since 2023

Bond markets are warning of credit event risks in advance, while equity markets have yet to price in them.

7. Cryptocurrency: Fear reaches its peak

• Bitcoin fell below the average opening cost of all 10 U.S. spot ETFs (approximately $94,200) on November 21, triggering a large-scale stop loss

• ETF capital flows turned positive for the first time last Friday and are expected to continue net inflows on November 24

• The Bitcoin Fear and Greed Index fell to 18 (extreme fear), consistent with the bottom in June 2022 and March 2023

• Key technical level: need to break through 93,000–94,000 (daily 20 moving average + previous high density area)

8. Commodities and Foreign Exchange

• Gold: It has entered the expected 1-2 month sideways consolidation phase. The current price is constructing a large cup and handle pattern near $2,630, and the target of $4,200 is still valid.

• U.S. Dollar Index: Standing above 106, breaking through 107.35 will confirm a new round of upward trend

• Crude oil: WTI is still subject to the supply wall of US$63, and there is no trend opportunity for the time being.

9. Short-term conclusions (next 1–4 weeks)

1. Seasonal factors (December is the month with the strongest increase in the past 75 years, with an average of +1.8%) + extreme short position liquidation + small-cap stocks lead the rise, jointly supporting the S&P 500 to challenge 6180–6200 before mid-December

2. However, CTA short orders are overhanging, institutional cash is extremely low, credit spreads are widening, and the concentration of heavyweight stocks is at historical extremes, which means that any rebound will be a “high-risk rebound.”

3. Optimal strategy: Tactically participate in the rebound (target 6180–6200), but strictly control the position and exit quickly when the breakthrough fails

10. Mid- to long-term concerns (outlook to 2026)

The current market structure bears striking similarities to the tops in 2000, 2007, and 2021:

• The proportion of cash is historically very low

• Leverage usage has historically been extremely high

• The historical weight of heavyweights is extremely high

• Defensive sectors begin to lead gains

• Credit spreads widen ahead of schedule

There is a high probability that there will be an adjustment of not less than 20% in 2026, and the triggering condition may be the Federal Reserve raising interest rates again, a credit event, or a CTA/negative gamma waterfall sell-off.The current stage is similar to March 2000 or November 2021-it is prosperous on the surface, but full of holes on the inside.

Summary: Go long in the short term (December), short in the medium and long term (2026)

In late cycle markets, time frame is everything.Now is the best stage to “sell shovels” to the last revelers, but we must also prepare in advance for next year’s systemic risks.Be cautious, flexible and respectful of the market.