r/stockmarket
The market panic looks overdone - Korea, SMH,SOXX, VIX, Jobs, and Oil
Market panic seems overdone; author highlights support levels for SMH, SOXX, and SPY based on options data and macro catch-up moves.
- Market panic appears overdone as the Korean sell-off is merely a catch-up move to Friday's US decline.
- Options market positioning indicates strong market maker support for SMH at 560 and 550.
- SPY has a major support level at 740, and the market is far from a doom-and-gloom scenario.
- SOXX looks precarious and could see a sharper drop toward 500 if it falls below 540.
- SPY positioning has skewed negative, and the negative volatility regime means market makers will hedge, increasing volatility.
Let’s start with the Korean market sell-off which is being heavily quoted today.
The KOSPI did hit circuit breakers but this is largely a catch-up move following Friday’s sell-off in the US.
https://preview.redd.it/8vbabzvx216h1.png?width=792&format=png&auto=webp&s=7daea1a3f1a2afdcc94ec583a28923bb083aa7e4
The Korean market’s regular session runs from 09:00 to 15:30 KST, or 20:00 to 02:30 ET, with extended trading from 07:30 to 18:00 KST, or 18:30 to 05:00 ET.
US equities trade from 09:30 to 16:00 ET during the regular session, with extended trading running from 04:00 to 20:00 ET.
So today’s move is more about it catching up to what happened in the US after its own market had closed.
Currently the EWY is trading at 2.5% up.
On to SMH. The ETF, which tracks the performance of semiconductors, is likely to get support from market makers at 560 and 550, with not a lot of market positioning below that. The data is calculated based on options market positioning - nodes poining right are bullish, nodes to the left are bearish.
https://preview.redd.it/jc6349i3316h1.png?width=617&format=png&auto=webp&s=2dca81faffadc6996484b81ee67d708f5e728bcc
SOXX is looking a bit more precarious, and if the price falls below 540, we could see a sharper move toward 500. However, that should be a very big support level for the market.
https://preview.redd.it/ol0qkv84316h1.png?width=595&format=png&auto=webp&s=4a8020f9e101f2c551ae2cbb8e855b9109c7e07d
SPY positioning has skewed more to the negative side, and the main support level that will likely slow the selling is at 740. We are still far from a doom-and-gloom scenario. The volatility regime is still negative, which means market makers will hedge with price action, thus increasing volatility.
https://preview.redd.it/egoi9sz4316h1.png?width=417&format=png&auto=webp&s=bbb7685dde154f3cc49fc9dac71d6b6f667d57b8
What needs to be noted today is that the VIX term structure has shifted, but the spike is mainly in the near-term contract, which again supports the thesis that the rally is not over and that this is an overreaction.
Market positioning is leaning positive but not overwhealmingly. Main resistance is $25, but $22 is also likely to subdue price action.
https://preview.redd.it/p6bqqb36316h1.png?width=842&format=png&auto=webp&s=744e1ef123747c937a9a72073e4779c27465a94e
https://preview.redd.it/g9p50nj6316h1.png?width=622&format=png&auto=webp&s=ce834b0e89dfee78dbfddb3dd6320c20c5174b53
The main reason the market sold off was Friday’s jobs report, which was very strong. As we wrote in our Friday daily note, if the report came in too hot, it would weigh on equities. Digging deeper into the report, you can see that the main category adding jobs was Leisure & Hospitality, which added 70,000 jobs. What media reporting is not saying is that the US is hosting the World Cup, and these jobs are likely to be temporary. The headline number might be very high, but it is temporary. The current repricing caused by the very high number is exaggerated and likely to revert.
The main problem is the escalation in the Middle East, again. While this is weighing on sentiment, the Strait needs to remain closed throughout late June and early July for this to become a more serious issue. So there is still time for a resolution. SPR is likely to fall to critical levels toward January, all else equal.
Options market positioning for USO (we use this as a proxy for oil) is looking rather neutral for now with $140 being the main resistance and £130 likely acting as a magnet
https://preview.redd.it/7oy4iz49416h1.png?width=616&format=png&auto=webp&s=3c970743e3f35ac7dc829921d7d48534cafaa39e
Whith this being said, the CPI report is due on Wednesday and until then, risk remaisn elevated. Had the confclit ended, a high number was likely to be overlooked, but now that we have uncertainty rising and if the number surprises to the upside, vol is going to pick up.
Done? I'm often amused by the degree to which people ignore the crucial signal at the heart of the risk factor.
SPR inventory is closing in the minimum operating level. Mid - June is when US driving season kickstarts. The massively underpriced oil paper market artificially cheapens crude prices which continues to accelerate the depletion of the salt cavern in which the oil reserves are contained.
The real critical level for the SPR is 100 to 150 million barrels because the storage caverns will collapse. At the current pace the U.S. will reach this catastrophic floor by December 2026. We have a couple of months before the panic starts, given tgere is no resolution to the conflict
Your definition of "critical" level is "cavern structures"? The SPR is closing the level where the oil reserves must be maintained for emergency services and military operations.
critical stresslevels starts at 250, the draw is 10million barrels per week, current spr levels around 350. id say 10 weeks tops at the current pace. but im betting on exxon reports that its alot shorter then that before marketwide reactions starts going into gear, this is farming season and gas/fertilizer helps push that even harder.
straits will likely remain closed for june and maybe even july until they get what they want, and they won’t budge despite what headlines say
Likely closed or limited for the rest of the year
in that case we would have a global recession
If you remove AI capex, we already are in one
they are also “ closing” Bab al‑Mandab Strait
"they", as in Iran, can not close the Bab al‑Mandab Strait as they exert no direct control there. Now, is Iran funding the Houthi or can they fund another group who can fuck shit up enough to make it too dangerous to traverse? Potentially. Yemen doesn't really pose any official military threat. So keeping it open by force if necessary wouldn't be the same challenge as Hormuz.
Thanks for the analysis. I liquidated on June 3 and I'm staying in cash until SpaceX IPO with a quartier of my portfolio into healthcare. Macro is super bad and this week is going to be fun for CPI and FOMC. The fact that the market reacts positively to unsubstantiated news and neutral on concrete bad news is enough for me to decide I don't want any part into this shitshow.
Bro sees one single red day and calls for a market bottom lol
Korean ishares is up 97% YTD, wtf are you talking about
I guess you missed the Black Monday headlines on Monday
we are in Bargain Monday
hardly any bargain when semi stocks have P/e 100
Will the futures market is up pre market this morning. That is Good news . There are a few more Fed reports coming out this c week. So see how those go