Basket 3: Sentiment

Sentiment is contrarian at extremes:

• VIX > 30: Fear extreme, often marks bottoms
• VIX < 12: Complacency, vulnerable to shocks
• Fear & Greed < 20: Extreme fear (bullish contrarian)
• Fear & Greed > 80: Extreme greed (bearish contrarian)
• AAII Bulls/Bears: Extremes mark turning points

Sentiment confirms other baskets. Fear at support = buy signal. Euphoria at resistance = sell signal.

Basket 4: Fundamentals

• Earnings Growth: Are companies beating/missing?
• Revenue Growth: Is top line growing?
• Margin Trends: Expanding or compressing?
• Guidance: What are companies saying about the future?

Earnings matter over time but are less important than liquidity for 6-12 month windows.

Basket 5: Positioning

• Hedge Fund Exposure: Crowded longs are vulnerable
• CTA Positioning: Trend followers pile in late
• Retail Flows: Often late and wrong at extremes
• Options Positioning: Gamma pinning, dealer hedging

Positioning is the FUEL. Light positioning + bullish catalysts = explosive moves. Heavy positioning = limited upside, crowded trade.

Synthesis Example:

Bullish Setup: Macro supportive, Technicals neutral, Sentiment fearful, Fundamentals stable, Positioning light → BUY

Bearish Setup: Macro tightening, Technicals breaking down, Sentiment euphoric, Fundamentals weakening, Positioning crowded → SELL