Hey trader,
The market sold off hard yesterday. Declining stocks outnumbered advancing stocks by 20 to 1 in the first hour.
VIX futures finished in backwardation. The VIX3M/VIX ratio closed below 1.
Most traders saw chaos and froze. The ones who had a plan already knew where to look before the market opened today.
That plan produced a session where COIN was up 15%, HOOD was up 7%, MU was up 7%, and PLTR was up 4%. The S&P 500 gained less than 1%.
We are going to break down how the list is built, why it works after capitulation, and how to use it every time the market reaches an extreme.
What Triggered the Setup
March 3 produced the most significant intraday selling since April 4 of last year. Declining stocks outnumbered advancing stocks by more than 20 to 1 on the NYSE.
Down volume exceeded up volume by 16 to 1.
VIX futures finished in backwardation. The VIX3M/VIX ratio closed below 1.
Those two conditions together have identified a market low within one to two days roughly 80% of the time over the past two decades.
Not every condition confirmed on a closing basis. The VIX spiked but faded back below 26.
The intraday readings were extreme enough to create a clear bounce setup. The question was where to look.
The High Beta Bounce List
There is an ETF called SPHB. It holds the 100 highest beta stocks in the S&P 500, measured over the trailing year.
The top 10 holdings as of March 3 included Robinhood, Coinbase, Dell, Micron, Palantir, Carvana, Tesla, Monolithic Power, Constellation Energy, and Microchip Technology.
That list was available to anyone who pulled up the fund page and clicked on portfolio holdings. No screening required.
On March 4, the S&P 500 was up 0.85%. Here is what the SPHB top 10 delivered:
- HOOD up 7%
- COIN up 15%
- DELL up 1.6%
- MU up 7%
- PLTR up 4%
- CVNA down (the only underperformer)
- TSLA up 3.6%
- MPWR up 1.5%
- CEG flat
- MCHP up 0.9%
Eight out of ten names outperformed the S&P 500. Several delivered gains that were multiples of the index return.
Why High Beta Leads After Capitulation
High-beta stocks fall the hardest in a selloff. That same sensitivity works in reverse when selling pressure exhausts itself.
The average stock in the Russell 2000 carries about 5.5% short interest compared to roughly 2.4% for the average S&P 500 name. Even a modest increase from 1% to 3% creates incremental buying when the position gets covered.
That covering adds fuel to the move and pushes high-beta names further than the broader index.
The Sector Map
SPHB also tells you which sectors lead the recovery. The sector breakdown showed technology at 40% of the portfolio weight, followed by financials and consumer discretionary.
Technology led the session on March 4. Financials were one of the few sectors that climbed out of the hole on March 3 and continued higher.
The breakdown is not static. In 2020, energy would have dominated the list.
The list adapts to whatever names carry the highest sensitivity at the time.
Why the Broad Squeeze Has Not Confirmed
Individual names bounced hard. The SPHB/SPLV ratio did not break out.
You can construct this ratio by dividing SPHB by SPLV and drawing a trend line across recent highs. On March 4, the ratio moved higher but stayed below that trend line.
Until the ratio breaks out, the bounce is a trade, not a trend change.
The Ghost Prints Surveillance Console provides the next layer of confirmation. When institutional call buying appears in high-beta names at scale, the Console flags those prints in real time.
What the Console Is Tracking Now
Skew rose alongside the VIX on March 3. Institutions are buying puts and selling calls at the same time, which caps the upside on any near-term bounce.
The Ghost Prints Console caught the hedging flow that drove those readings in real time.
The capitulation signals say the market can bounce. Skew says institutions have not finished repositioning.
Keep cash levels elevated while taking selective risk in the names that move the most off the lows.
The SPHB list gives you the names. The Console gives you the confirmation.
The next time the market sells off hard enough to trip the volatility triggers, the list will be ready. The names inside it will change.
The process will not.
See exactly how Ghost Prints reveals institutional positioning before the crowd catches on.
Brandon Chapman, CMT
Creator of Ghost Prints