Dirty fingers and right tails
Short one today - I have been waiting patiently for the big day to signal an end to this chaos in US tech names specifically. I am not attempting to call the bottom as we all know what happens to those who do, they tend to end up with dirty fingers but I am calling for a truce of sorts.
Yesterday saw one of the largest Equity put/call ratio prints on record @ 1.336. Since 2000 there has only been 15 larger prints of which half of them came about during 07/08 carnage.
This is the equivalent of waving the white flag and its one of two things - PM’s paying high vol for further downside protection or over zealous PM’s buying puts for further brutality. Either way when positioning lurches one way or the other it tends to put the brakes on things for a while.
We can still of course grind lower - or more likely sideways for a very long time while the market undergoes a sorting process to establish who has been overcooked and where there might be some potential going forward.
Many are looking for the Generals to crack - i.e. the real heavyweight tech names that have led the way higher during this remarkable bull run. I think this slightly misses the point of what has gone on - sure some of them have high valuations also but they have a body of work with real earnings under their belt and have built phenomenal businesses.
We have seen a markdown of the names who had quite literally insane valuations the justification for which was questionable.
Again I am not trying to pick the bottom I just don’t think we see the levels of bloodshed we have witnessed over the last few weeks and months as yesterday it looked like investors were willing to pay up for the insurance to cover them in case of fallout - those who sold them the options have the incentive of making sure they are not monetised and those that own them feel less panic and evaluate their selling decisions a little calmer. remember its not that there has been more sellers than buyers over the last few weeks - its that there has been more motivated sellers than buyers.