By Elliott Wave International
On December 6, within two days of the Dow's all-time high, the Elliott Wave Financial Forecast offered this unique insight:
"Leverage is investors' real-money way of
expressing an extremely positive social mood, which prompts the thought,
"I want more." Investors always want the most at the end of
any advance. The charts below show the merger of these two trends, as
leveraged ETF volume now sports the classic verticality that invariably
marks the end of a mania. Notice the ever more powerful risk orientation
illustrated by the other chart of leveraged U.S. single-stock ETF bets.
According to SentimenTrader.com, there are now $14 in leveraged long
ETFs for every $1 in leveraged short funds, which exceeds the prior
record from December 27, 2021, a month right between the market top in
the NASDAQ in November 2021 and the Dow and S&P in January 2022. The
ratio has surged a Fibonacci 62% since the end of October. Here, as in
so many areas, riskier assets are experiencing the most rapid increases,
signaling an impending exhaustion. Thanks to the miracle of modern
financial engineering, leverage has seeped into every pore of finance."


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