I just finished reading UBS's strategy report today, roughly speaking: The core argument in the report is that the market has risen too high, too fast, too concentrated, too crowded, and is now a bit "hanging". It is not suitable for impulsive entry, but you should think about how to defend, or even reduce your position moderately. On the whole, one of the most important signals sent by this report is: "The large army has rushed to the front line, and no one is following behind. ” How do you say this? Let's take a look at it. 📌 1️⃣ The position is too crowded - CTA fund "full charge" The report mentioned that those systematic funds engaged in quantitative trading (CTA) are now very full of long positions in US stocks, reaching the 92nd percentile, what does this mean? You can understand that this group has opened positions 100 times in history, and this time it is the most aggressive in the top 8. In other words, they basically have little "room to buy" and can only sell. And what is the biggest feature of this type of fund? The action is fast, the direction is ruthless, and when the wind blows, everyone turns around. If there is a problem in the market in the future and these CTAs are sold backhand, it will not be a small adjustment, but a stampede decline. 📌 2️⃣ The market has risen too concentrated - it is supported by a few technology tycoons The report also mentions a very dangerous structural problem: the entire S&P 500 rise is almost supported by a few tech giants. To give the most direct example: • The overall S&P 500 rose 2.8% in July • Nvidia alone contributed 42% of that Let's look at the weight: in the S&P 500, the top ten companies account for 40% of the weight, and Microsoft and Nvidia add up to 15%! What do you mean? The other 490 companies didn't rise much at all, and even fell. This kind of "rising on several heads" market is easy to be unbalanced. • Either these giants continue to fly – but valuations are not cheap now • Either once they make up for the decline - the entire market is on its knees 📌 3️⃣ The interior is differentiated, the plates are rotating, and the style may change The report also mentions: • The style within the market has begun to change, with sharp rotation in the consumer and pharmaceutical sectors • Some sectors that have fallen have begun to buy the bottom • Those AI and technology that have gone crazy have begun to take profits So my own understanding is: style rotation may be coming, and mean reversion is approaching. 📌 4️⃣ The flow of funds is quietly changing Don't look at the market is quite stable, the funds are already quietly "transposition". • European funds: began to sell net, especially consumer and banks • Americas: Buy media, retail, REITs, semiconductors • Asia-Pacific: Buy semiconductors, telecommunications, aviation I see that the understanding here is that investors are quietly reducing risks, changing defensive varieties, and rotating layouts. 📌 5️⃣ The US dollar short trade is too crowded, and the rebound will bring a stampede UBS specifically reminded that shorting the US dollar is now very crowded, and once the US dollar rebounds, the stampede of short liquidation will bring a huge shock. Once this situation arises: • The dollar is coming up • US stocks, especially technology stocks, will be under pressure • On the contrary, low-level assets such as European stocks and value stocks may benefit 📌 6️⃣ Seasonality is unfavorable, and volatility may be amplified I am also very concerned about this, August and September every year are relatively dangerous times. • August was the month with the biggest increase in VIX volatility of the year • September was the worst month of the year for the stock market And now? • Market true volatility (e.g. VIX) is still low • But the position is so high and the concentration is so large Like a taut string, it is quiet when it is fine, but it may break when the wind blows. On the whole, it is consistent with our strategy, and recently as we approach August, we are reminding some risks, try not to chase high, defend, and even hedge profit protection. The report mentions: • This is the first time this year that UBS has been "extremely cautious" about the market • A "significant net short strategy" or at least a "defensive stance" is recommended As a personal person, some of my strategy suggestions: In terms of short-term operations: • If you don't chase higher, the rebound will be reduced by a little • Consider using options for some protection • Be flexible and see if there is a chance of a mistake if there is a sharp drop In the medium term: • Focus on track rotation and ETF listings • Pay attention to sectors and stocks that have been wrongly killed, have valuation advantages, and have fallen out of value • We will also keep an eye on the trend of the US dollar and US bonds to see if there are any greater macro signals I hope it will be helpful 🧐 to everyone