euphoria.”

… and adds that “this peak in valuation was followed in January by a peak in positioning as both institutional and retail investors piled into stocks at rates we haven't witnessed in years… Back in January when stocks were rising sharply, we heard numerous calls for a “melt-up” being made by prognosticators and investors. Of course, that's how tops are made and we think January marked the top for sentiment, if not prices, for the year.”

He also noted that with volatility now much higher, “a return to those levels of exuberance is very unlikely.”

However, there was one particular chart supplied from Morgan Stanley that caught our attention: the gross leverage at Long/Short hedge funds. What it shows is not only the fastest collapse in gross exposure on record, but a pattern that is oddly similar to what happened during the last euphoric surge in mid-2007, which was promptly followed by the great financial crisis.

This confirms what both JPM and BofA have pointed out recently: institutions, and hedge funds, have been tireless sellers of equities in recent weeks.