Chip slip and the tech tumble

Got chips?

Is this the beginning of something bigger or not, but global chip stocks had a poor week this week. Note that most names are trading at the same levels we traded at almost a month ago. Is the perceived AI bull stronger than the actual one?

Source: Refinitiv

Mighty tech...

...beaten by SPX over the past month. Broadening of the rally, or tech fade trying to tell us something?

Source: Refinitiv

Staying stretched

The Goldman "Sentiment & Positioning" indicator is at a level that would imply lower equity returns going forward. It is all about timing though...

Source: Goldman

The signal

BofA's greed and fear sentiment indicator moved higher over the past week. From 3.5 yo 3.8. It worked great as the contrarian buy again, but things are much less "obvious" at these levels.

Source: BofA

Getting there, but...

...still not at extremes when it comes to CS' aggregate tacticals indicator.

Source: CS

Buyback bear

Corporates' net buying has sharply decreased from a peak of 6% of market cap to currently at 1%. Buybacks are underperforming, and only 24% of companies have an earnings yield higher than high yield, which discourages cash payback.

Source: CS

CTAs and equities

CTAs have been running rather big longs lately. BofA adds some color: "...our model CTA implies that positioning could continue to grow longer on the back of declining realized volatility. With positioning stretched fairly long, a full unwind/stop loss is not far for each index at just over 2.5% down from current levels". Downside convexity remains big.

Source: BofA

Source: BofA

Monster gap

Valuations had closely tracked the path of rates in recent years.

Source: Goldman

When will the gap become too wide?

Fed adjusted liquidity supporting risk-on move, but when will the gap become too wide?

Source: Macrobond

See TME's daily newsletter email above. For the 24/7 market intelligence feed and thematic trading emails, sign up for ZH premium here.