Crowded Semis, Gamma Gone, Squeezy Gold
Remember?
We’ve been outlining our déjà vu logic over the past weeks. Nasdaq remains stuck inside the range, but momentum continues to deteriorate. Note the bearish 50/100-day cross now in place, with the 200-day moving average sitting slightly below.
A break below 24,500 (futures), and last year’s déjà vu continues to play out almost perfectly.
Source: LSEG Workspace
You know Tech sentiment isn’t great when…
"...the fwd P/E of the Info Tech GICS (blue) is now at par with that of the Staples GICS (orange) – something that typically only happens during ‘market events’ (Liberation Day etc)." Writes GS.
Source: GS/Bloomberg
Time to move
Dealer gamma has collapsed toward zero after spending most of the past year in a supportive +$4–9bn range.
Low gamma isn’t directional, but it removes a key stabilizer, shifting the regime from grind/mean-revert to more reflexive, with bigger moves.
Source: GS
SOX Boom/Bust
The SOX’s 32-year history shows a sector that is cyclical but structurally rising, every bust has set a higher floor. Booms average 41 months and +309%, while corrections last 11 months and retrace ~48%. The current AI cycle, at ~40 months and +271%, is statistically mature but not necessarily over.
The real risk isn’t duration, it’s valuation and demand concentration. The longest, most durable runs were driven by broad, multi-end-market demand. Whether AI expands beyond training into inference, edge, robotics, and enterprise, adoption will decide if this cycle extends, or ends like 2000 and 2021. Chart shows longer term relative valuation. (Stats via Goldman's Kapta)
Source: GS
Semis pullback?
"Semis & Semi Equip has been by far the most net bought subsector on our PB pad YTD – if AI disruption continues to cause investors to take down risk, we think Semis looks extremely crowded. With 1-month 5d/25d put skew looking highly elevated, we also like put spreads in SMH to play for a more targeted pull back." (GS) More on the most crowded long here.
Source: GS
MAG7 under-owned
On the same theme, MS argues that Mag7 are under-owned (based on end Q4 institutional data). Latest MAG note here.
Source: MS
10-year low
Mag 7 are trading at the lowest premium vs. S&P 493 in last 10 years.
Source: GIR
Before you get too bearish
Nomura's McElligott explains how an options driven squeeze could play out:
Point being: if spot equities continue to stabilize, those crowded VIX calls are going to melt, with plenty of room for implied volatility to compress further.
That feeds into a virtuous loop: as hedges decay, delta flows flip to equity futures buying. Vol-control strategies mechanically add back leverage as VIX resets lower, while under-exposed investors who recently cut net and gross risk may be forced to buy higher.
The kicker? A chase for upside via relatively “cheap” calls could create a spot up, vol up dynamic.
Chart shows that upside skew has imploded. Downside skew has exploded. More here.
Source: GS
Will they ever "wake up"?
Gold specs remain in "refusal/denial" mode. More on gold here.
Source: LSEG Workspace
Overbought
Rounded off, gold monthly RSI stands at 96!
Source: LSEG Workspace
Shorts carried out on stretchers
The stop is in: Last week’s % short covering in US Energy stocks was the largest since Oct ’22 and the second largest in the past five years according to GS PB. More on oil and XLE here.
