Is it still possible to 'short' the US stock market now?

There is an old saying on Wall Street: 'Buy the hedge when you can, not when you must'. With US stocks falling continuously this year, investors desperately need to buy hedges. They have indeed bought a lot recently, but is it still effective?

Since 2022, the S&P 500 index has fallen more than 23%, the Nasdaq index has fallen more than 30%, and the Dow Jones Industrial Average has fallen nearly 20%. Almost all have entered a technical bear market. Looking back at several major bear markets in US stock market history, the current decline is only second to the Great Depression in 1929 and the outbreak of the COVID-19 pandemic in early 2020.

On September 28th (Wednesday), the 10-year US Treasury yield index approached 4%, the first time since 2010.

Marko Kolanovic, Chief Global Market Strategist at J.P. Morgan, stated in the latest report that the positioning and returns of all assets are at their lowest level since the data has been tracked since 2010.

The market sentiment index has already fallen below the pessimistic average line, and the depressed atmosphere has reached its extreme.

First, all individual investors have flocked to the bearish camp. In the third week of September, individual investors bought $18 billion worth of bearish options, the highest recorded data to date. Currently, individual investors hold a total of $46 billion in short positions, which is also a record high.

Second, investment banks also recommend avoiding stocks. Goldman Sachs has lowered its global stock investment rating for the next three months to 'shareholding' and advises investors to increase their cash holdings. Goldman Sachs strategist Christian Mueller-Glissmann stated in Monday's report that the current stock valuation levels may not fully reflect the risks associated with economic downturns and may need to decline further to reach the market bottom.

BlackRock also advises investors to 'steer clear of most stocks' and adds that it recommends 'tactically reducing holdings in developed country market stocks'. BlackRock strategist Jean Boivin wrote in Monday's report that the probability of a 'soft landing' for the US economy is very low, which means that risk assets such as stocks face greater volatility and downward pressure.

Generally speaking, individual investors are contrarian indicators. When they invest extremely in one direction, it is highly likely that the market will reverse. But now the situation is that institutions and individual investors are moving in the same direction. Is this a bigger contrarian indicator? Or has the market really not reached its lowest point yet?