VoSI VooDoo(TM) Report - Proper Conditioning

Published:

4 Nov 2025 10:13 ET

The VoSI VooDoo Report
Offbeat Ideas and Commentary from the Depths of Gil's Trading Notes

Bill O'Neil used to tell me that when big money is distributing stock along what eventually becomes a market top, they try to condition buyers to come in on every pullback off the peak. Over the past few days we have seen consistent gap-up moves or early rallies that get sold into, taking the indexes back towards the UNCH line or just below, sometimes even a little more than that, but just enough to make things look bearish.

At that point the selling stops and the market grinds its way back higher in a fade the fader type of move. This, as Bill used to tell it, conditions the bulls to come in and buy the fade. Eventually, the market top occurs with a big gap-down, and all the buyers are now trapped bulls who likely will just sit there like deer in headlights, which is what the big sellers want. I sell, you sit there and stare into the headlights of a market sell-off.

Of course, Bill was usually talking about a market without algos, when institutions in the form of mutual funds, banks, pensions, etc., dominated the daily order flow. He would say that they needed to get the hook in good, reeling in the line and then letting it out again several times before they had sold enough to let the market puke but keeping them buyers that they need to sell to on the line the whole time.

This was the process that created this phenomenon that Bill also talked about which is that the market is topping even as it continues to rally higher. And we have seen this in concrete terms as the charts of various economically-sensitive areas of the market have been in downtrends as tech continues to push the indexes higher.

I watch the way this market has been trading lately and I wonder whether we are not seeing something similar to what Bill was talking about. After all, everybody is up to their eyeballs in stocks, which now represent 45% of U.S. household financial assets as of Q2 2025, surpassing the late-1990s DotCom peak and marking an all-time high. And to top that off, I cite the comment that I read recently that at no time in history has so much money been invested in nothing but air.

Just some thoughts about all the air in this market and what Bill might think of it all as I sipped my coffee on the back porch earlier this morning.

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