Good morning, traders…

Let me tell you about Tom Lee, the CIO and Head of Research at Fundstrat Global Advisors. 

You’ve probably seen him on CNBC as a regular contributor.

He’s kinda hard to miss:

But while his hair might be a bit crazy, he is not. 

He’s actually somewhat of a genius. 

When everyone was freaking out and selling stocks during COVID, he called the V-shape recovery before anyone.

When interest rates were tightening in 2022, he predicted the 2023 rebound.

When the tariff shock happened earlier this year, he knew it was overblown. 

Lee has been correct with nearly every major market call he’s made in the past five years.

Last week, Lee went on Closing Bell with a new call: 

This market rally has only just begun. 

He laid out three reasons the rally has room:

1. The Fed hasn’t cut rates yet. Our rates are higher than most of our geopolitical peers, and they’re almost certainly going lower from here. When that cut happens, it should give stocks a huge boost.
   
2. Multiples will expand. Companies have survived five major shocks (COVID, supply chains, inflation, rate hikes, and geopolitical stress). That deserves a re-rating.
   
3. Tariff risks should continue to dissipate. But earnings estimates are still pricing in tariff concerns. If trade flows improve, earnings could surprise to the upside. 

      4. Most importantly: Smart Money positioning…

Lee calls this “the most hated V-shaped rally by institutions” he’s ever seen. That tells you the Smart Money is underweight. 

He says there’s $7 trillion sitting in money market accounts, just itching to be deployed into a lower-interest-rate stock market. 

If the Fed cuts or trade deals get made, that cash won’t stay parked…

It will get forced into the market as Smart Money funds chase the benchmark index. 

Don’t Miss This Rally Like The Hedge Funds, Do This Instead…

The Market Internals Support Lee’s Call

Lee’s comments about institutions hating this rally are supported in the market internals. 

Market internals show you something more important than price. They show you what’s driving the price.

Think of them like engine diagnostics for the market. They measure sentiment, positioning, volatility, and flow.

If price is the result, internals are the inputs.

Here are the three indicators I trust most (and what they’re telling us right now):

Put/Call Ratio (PCR)

The PCR measures how many puts are traded vs. calls.

• SPX PCR: ~1.58
• SPY PCR: ~1.70 (30-day)
• Equity-only PCR: ~0.48

Readings above 1.0 tell us traders are buying more puts. Hedging, caution, maybe fear. That’s what we’re seeing in SPX and SPY right now.

But the equity-only PCR is down at 0.48, showing bullish flow in individual names.

That split gives us a huge hint…

It means institutions are hedging index risk, while retail traders keep buying stocks.

If PCR drops toward 0.35, it often signals too much bullishness or a short-term top.

Watch out for this. Pay attention to where the Smart Money is positioned. 

Skew

Skew measures how expensive out-of-the-money (OTM) puts are compared to calls.

• Current SKEW: 141

The current SKEW at 141 means the Smart Money is buying insurance.

They’re not panicking, but they’re not fully confident either. 

A drop back into the 120s would tell us sentiment is relaxing.

VIX

The VIX measures expected 30-day volatility in the S&P 500. It’s calculated from S&P option prices (how much traders pay for puts).

• Current VIX: 17.92

As a simple rule of thumb: Above 15.50 is more dangerous, below 15.50 is cruise control. 

So why is the VIX elevated with the market near all-time highs?

Remember what Tom Lee said: Big funds are buying downside protection. They’re not participating in the rally as much as they normally would.

But instead of viewing this as a signal of impending doom, I agree with Lee. 

The war and tariff risks aren’t as bad as the news makes them out to be. 

Using Internals to Set Orders

You’re probably wondering how to use all of this information in your trading.

It all comes down to using a specific type of order — a “One Cancels the Other” Order.

OCO is a type of conditional order that helps you manage risk and automate trade exits.

In an OCO, you place two orders at once:

• A profit target (sell if price goes up).
• A stop loss (sell if price goes down).

Whichever order gets filled first, the other one is automatically canceled.

Let’s say you buy a call option at $2.00. You set an OCO with:

• A sell limit at $3.00 (your target)
• A stop at $1.50 (your max loss)
• If the price hits $3.00, you take profit and the stop cancels.
• If the price drops to $1.50, you cut the loss and the target cancels.

It’s simple automation that protects your downside and secures upside. And you can set these orders based on market internals.

This can be helpful if you’re stepping away from your screens for a while, like I did last week.

Imagine you see these internals:

• VIX below 18, trending down
  
• PCR balanced
  
• Skew easing

Then you take this trade:

• Buy August 15 NVDA $160 call at $7.85 

With this OCO Structure:

• Sell limit: $13.00 (~65% gain)
  
• Stop: $5.00 (limits loss to ~$285 per contract)

Here are the outcome Scenarios:

• If the call hits $13.00 → You lock in profit, stop cancels
  
• If the call drops to $5.00 → You exit with defined loss, take-profit cancels

Why This Plan Could Work

• Skew and VIX allow a bullish trade with defined risk.
  
• Strike is near the money (more responsive to directional moves).
  
• OCO manages the trade for you. Major decisions are made before you enter. 

If Tom Lee is right again, this rally has room to go.

Don’t miss it like the hedge funds. 

Happy trading,

Ben Sturgill

P.S. Since launching my OMEN Scanner, I’ve achieved an 89% win rate with a 72% average gain…

My top 120 trades have all generated 100% or higher. 27 soared above 200%, and 12 exploded beyond 300%…

But my biggest trade yet could be setting up RIGHT NOW.

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*Past performance does not indicate future results