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Last week, famed perma-bear, Michael Burry, announced he was closing up shop because his models have not been in sync with the markets for many years. Before dismissing this as just another Chicken Little calling it quits, Burry did parlay his Armageddon view into billions during the Great Financial Crisis which later became the book and movie called The Big Short.

Since his generational trade 17 years ago, almost every single public call he has made has been a dud which is what usually happens to people like this. I have used people like this in our models to stay long the market or get even longer as they are usually wrong. I am a little concerned that closing up Scion Management is a contrarian indicator that AI and the tech trade are about to find some challenging times.

And this is against the backdrop of what I have been writing about since the markets peaked. Several of our non-aggressive market models have turned neutral or negative because of the drop in participation. The biggest tailwind I can spot is that it’s Q4 when large declines typically do not occur, save 2000, 2007 and 2018.

In short, I do not love how the markets are acting, but I also do not think a 10%+ decline is coming this quarter. Perhaps a trading range is developing between 6500 and 6900 on the S&P 500.

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And the opportunity in the small caps which I have been discussing since April has clearly taken a negative turn over the past month. If the Russell 2000 was embarking on an intermediate-term position of outpeformance, I would not expect it to lag so badly during a mild stock market pullback.

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On Friday we sold PCY.

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