To The Moon

Following last week's historic sell-off, the U.S. stock market—particularly the semiconductor sector—is standing at an extremely critical crossroads. It is no exaggeration to say that if the market takes even one more step downward, it will likely trigger a substantial, weekly-level decline. However, if the market can hold its ground against the current downtrend and stabilize, a phased recovery is not far out of reach, especially if tensions in the US-Iran conflict continue to cool. Therefore, this week's price action is of paramount importance to U.S. equities.

At this critical juncture, since we cannot precisely forecast geopolitical developments, relying on technical analysis and real capital flow data to gauge market sentiment becomes essential. Today, Owen's analysis will delve deep into technical trends to unpack whether the tech sector's sell-off has bottomed out. Furthermore, I will explain why the massive capital outflow from semiconductors is highly likely to push gold into a short-term rebound.

$标普500(.SPX)$ $标普500ETF(SPY)$ $SP500指数主连 2609(ESmain)$ $微型SP500指数主连 2609(MESmain)$ $纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $NQ100指数主连 2609(NQmain)$ $微型NQ100指数主连 2609(MNQmain)$ $道琼斯(.DJI)$ $道琼斯指数主连 2609(YMmain)$ $微型道琼斯指数主连 2609(MYMmain)$ $道琼斯ETF(DIA)$ $纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$

The Worst May Already Be Behind

Describing last week's tech stock sell-off as "brutal" is an understatement; it shattered multiple historical records.

Looking at Morgan Stanley's basket of tech momentum stocks (typically a collection of the biggest gainers with the strongest buying pressure), these "market leaders" suffered their steepest drawdown since 1999.

Even more alarming is the capital observation data from Goldman Sachs' prime brokerage desks: major institutional exposure to tech stocks experienced almost its largest pullback since 2017 last week. This consequently led to a sharp drop in both gross and net leverage exposure to U.S. equities among institutional investors.

$高科技指数ETF-SPDR(XLK)$

Does this mean the U.S. market is poised for a continued crash? I don't think so. On the contrary, given the historically rare intensity of the selling, the selling pressure on previously leading sectors like semiconductors has been intensely released and is actually quite exhausted.

Let's examine two critical volatility indicators. Currently, the daily fluctuation range of QQQ over the past 30 trading days is 1.5 times its implied volatility—the second-highest reading in over a decade.

Furthermore, the premium of SOX (the PHLX Semiconductor Sector Index) over its 200-day moving average has plummeted from a 26-year high, returning to a normal range.

These hardcore data points are sending us a signal: the craziest, most extreme period of volatility is likely behind us. While we absolutely cannot declare that U.S. stocks have firmly bottomed, barring a new "black swan" event triggering another crash mode (such as a drastic deterioration in the Middle East), the intensity of the tech sell-off should gradually stabilize.

Why am I hesitant to call a definitive market bottom right now? Because one crucial sector—the SOX semiconductor index—has yet to show any signs of stopping its decline or rebounding.

$费城半导体指数(SOX)$ $三倍做多半导体ETF-Direxion Daily(SOXL)$ $三倍做空半导体ETF-Direxion Daily(SOXS)$ $iShares费城交易所半导体ETF(SOXX)$

Based on the SOX chart, a very obvious top structure has been broken. After breaking below the neckline, conventional technical rules suggest the price will continue to probe lower by a magnitude equivalent to the entire Head and Shoulders top pattern—meaning it could test the 9500 level. Unless there is a major positive catalyst to alter this technical trend (and I believe news like a "US-Iran peace settlement" would possess sufficient power), we cannot assume the market has bottomed, nor can we assume massive downside remains. For stock indices, we must be patient.

If SOX continues its descent, we can attempt a straddle options strategy on QQQ to capture gains from an ascending VIX index.

This is a buyer-side strategy with a fixed maximum loss and strong overall safety. Here's the play: when SOX breaks below the blue support line on my chart, you can buy at-the-money put and call options on QQQ expiring in two weeks. They must share the same expiration date and strike price. The goal is to profit from the gamma squeeze caused by a surging VIX; the profit from one side will cover the loss from the other. After one week, you should consider taking profits and closing the position, or reopening a new two-week combo. Keep in mind that the current VIX might be sitting at its lowest level for the entire year.

$标普500波动率指数(VIX)$ $波动率短期期货指数ETF(VIXY)$ $1.5倍做多短期期货恐慌指数ETF-Proshares(UVXY)$

Semiconductor Hemorrhage and the Golden Opportunity

Pay attention here: Since the semiconductor sector has suffered a historic capital exodus, and it's highly unlikely that this money will immediately execute a "U-turn" back into the sector in the short term, where will this massive pool of capital go looking for suitable buying targets?

$美光科技(MU)$ $1.5倍做空NVDA ETF-Tradr(NVDS)$ $英伟达(NVDA)$ $南方两倍做空英伟达(07388)$ $SK海力士(SKHY)$ $南方两倍做多海力士(07709)$

The answer is clear: Gold. I firmly believe gold is an asset that absolutely cannot be ignored in the near term.

This judgment isn't pulled out of thin air; it's based on capital flow statistics from Bloomberg. Year-to-date, the magnitude of capital outflows from gold and Bitcoin ETFs perfectly matches the capital inflows into semiconductor ETFs. This demonstrates that market funds were previously flowing steadily out of gold and crypto markets and into the semiconductor sector.

Now the tables have turned: semiconductors have plummeted, and capital is retreating en masse. Driven by capital's inherent pursuit of profit and safety, these funds urgently need a safe haven that has already experienced a deep correction. Therefore, while it remains uncertain whether semiconductors have passed their danger zone, gold—which has been in a prolonged slump—is perfectly positioned to welcome this returning capital.

Analysis from Bank of America suggests that gold's overall downtrend is not over (they argue that a 24-week pullback is too short compared to previous downtrends that lasted hundreds of weeks). I only partially agree. I concur that gold will offer a tradable short-term rebound, but when it resumes its descent, the drop might not be as severe as BofA predicts.

I believe it's entirely possible for gold to find its ultimate bottom at the 20-month moving average, preventing it from dropping too low.

$黄金主连 2608(GCmain)$ $黄金ETF-SPDR(GLD)$ $白银ETF-iShares(SLV)$ $微黄金主连 2608(MGCmain)$ $微白银主连 2609(SILmain)$ $迷你白银主连 2609(QImain)$

From a technical perspective, gold is currently using the 20-day moving average as the trigger point to capture rebound profits. It recently pierced this vital line, indicating a high probability of an explosive rebound right here.

However, strict trading discipline is required: breaking above the 20-day moving average is only step one; step two is breaking above the long-term descending trend channel; step three requires the main contract price to forcefully break through the 4236 level. Only then can we consider adding to long positions for short-term plays.

Playing Defense: Focus on Three High-Yield Blue-Chip Sectors

While the overall direction of the U.S. market remains murky, aside from front-running a gold rebound, what other relatively safe havens exist?

I strongly recommend focusing on the Banking (XLF), Healthcare (XLV), and Energy (XLE) sectors. They share common traits: high dividend yields, stable trends, and future growth expectations that haven't been overdrawn.

$SPDR能源指数ETF(XLE)$ $金融ETF(XLF)$ $健康照护类股ETF-SPDR(XLV)$ $MACH7 TECHNOLOGIES LTD(M7T.AU)$

The Energy sector (XLE) is particularly notable. XLE has already forcefully broken through its weekly resistance level (the 20-week moving average). This indicates that the exceptionally high crack spread profits will very likely continue to surge. As long as the navigation crisis in the Strait of Hormuz isn't fully resolved, XLE's upward trajectory will be hard to derail.

Operationally, I plan to collect steady premium profits by selling weekly rolling put options below the 20-day moving average.