SentimenTrader

🔴Are US semiconductor stocks heading for a rough few months? Semiconductor stocks, tracked by the $SOX index, have moved in close lockstep with silver mining stocks over the last year, with silver stocks leading the pattern by ~4 months, according to Morgan Stanley. Both groups posted parabolic rallies tied to strength in their underlying commodity markets. Silver stocks already PEAKED and rolled over earlier this year, and if the relationship holds, semiconductor stocks could face further downside ahead, led by memory names, the most commodity-like segment of the sector. Semiconductor strength looks unsustainable given how heavily it depends on hyperscaler capital spending. Recent weakness in semis was amplified by Meta announcing plans last week to sell excess data center capacity, unused computing power originally built for its own AI needs, to outside customers. This signals Meta may have overbuilt relative to actual demand and may not need to purchase as many chips going forward. The AI infrastructure trade may be entering a period of demand reality checks.

The S&P put/call skew just collapsed to 0.71. Not a low. The lowest reading on record. The 10-year average is 12. The 2020 panic peaked at 34. We're at 0.71. What this measures: how much investors pay to protect against a crash versus betting on a rally. At 0.71, crash protection is essentially free. Nobody wants it. Think about what that means. After two years of gains, at record concentration, with households at record equity exposure, the options market has priced hedging like insurance on a house that cannot burn. History's lesson is consistent: markets don't crash when everyone fears a crash. Fear is the hedge. This chart says the hedge is gone. Nobody buys insurance at the top. That's what makes it the top?