The stock market is on a tear in 2023, led mostly by the technology sector. But we've just entered the weakest seasonal period of the year for stocks; August and September are the two worst months for the benchmark S&P 500 index, based on data going back more than three decades. 

We're only a couple of weeks into August, and the SPDR S&P 500 ETF (SPY 0.95%) is already down more than 2% this month, and the technology-focused Invesco QQQ ETF (QQQ 1.54%) has declined by over 3%. But based on the positioning of Scion Asset Management, which is run by famous investor Michael Burry of The Big Short, the market might be set for an even steeper decline. 

The firm just filed its 13F, which details its holdings as of the end of the second quarter (ended June 30). It revealed big bets against the SPY and QQQ ETFs using put options worth a notional $1.6 billion. Here's what it could mean. 

Michael Burry is no stranger to making controversial bets

The Big Short film follows the story of Michael Burry and a handful of other investors who made one of the largest contrarian financial bets in history. In the lead-up to 2008, they purchased securities that would increase in value if U.S. homeowners failed to pay their mortgages, based on the idea that the housing market was flooded with fraudulent behavior and unsustainable excess. 

Burry made his bet through his hedge fund, Scion Capital. His investors thought the play was reckless, and he endured vicious criticism -- up until it eventually paid off when the housing market crashed in 2008. Burry took home an estimated $100 million, and Scion's investors pocketed a whopping $700 million. 

After cashing out in 2008, Burry shut down his hedge fund to focus on other ventures. He decided to operate under a new firm called Scion Asset Management a short time later, which is the vehicle he now uses to make many of his own personal investments. He has used social media actively over the last few years to express his opinions on everything from the economy to the U.S. Federal Reserve's policy decisions -- and he typically makes investments to back up his views. 

But the position he just took against the stock market came without any commentary. According to Scion's second-quarter 13F filing with the Securities and Exchange Commission, the firm bought put options against the tech-focused QQQ ETF worth $739 million and put options against the SPY ETF worth $886 million. 

Those figures represent the notional value of each position -- options are leveraged securities, so Scion would have paid significantly less than that (the amount wasn't disclosed). Put options express a bearish view of a given market, so if the QQQ and SPY ETFs decline in value, the premium Scion paid for its options will increase in value -- which will deliver a profit for the firm.

Burry also bought a few individual stocks in Q2

It appears The Big Short investor still sees value in some pockets of this market because he was also an active buyer during Q2. 

He opened new positions in consumer-focused stocks like Expedia, MGM Resorts, and CVS Health. Burry also made some bets on the energy sector by opening new holdings in NexTier Oilfield Solutions and Crescent Energy, among others. Those moves suggest he might be expecting oil and gas prices to remain elevated for the rest of 2023. 

But Burry did sell down many of his previous holdings, too. He slashed Scion's exposure to China by dumping every share of Alibaba and JD.com, and he also exited several regional bank stocks. The latter move is unsurprising, given the turmoil in that sector earlier this year. 

The average investor shouldn't follow Burry's lead

Most investors have built a stock portfolio to help fund their retirement. Burry, on the other hand, is already extremely wealthy, and investing is not only his job, but it's also his hobby. He has enough experience to jump in and out of different securities every few months and make outsized, short-term bets on the direction of the market. 

That isn't a realistic strategy for most people. Instead, buying quality stocks and holding them for the long term is a proven way to generate positive returns. Burry could very well be right about the market declining further in the short term, given the historical weakness in August and September, but that should be treated as an opportunity to buy more stocks for the long run. 

While it's fun to watch Wall Street's heavy hitters move and shake, it's important for everyday investors to remain focused on their own goals.