Grafer om aktie-euforien: The Melt-Up Keeps Sucking People In

The upside chase keeps pulling investors aggressively into AI, semis, momentum, and upside volatility. At the same time, breadth keeps deteriorating, downside protection is getting abandoned, and several positioning dynamics are quietly building dangerous downside convexity if markets suddenly reverse lower.

The melt-up keeps getting more crowded just as downside protection gets cheaper.

Dollar lagging

Near-term USD upside risks still look materially underpriced, according to BofA.

Strong US data, resilient equities, underpriced Fed hike risks, and relatively clean positioning all continue arguing for a much stronger Dollar backdrop than current sentiment implies.

Source: BofA

Dollar disconnect

DXY continues lagging the sharp pickup in Citi US economic surprises.

Historically, stronger relative US data has tended to support the Dollar much more aggressively than what we are seeing today.

Source: LSEG Workspace

Narrow leadership

Breadth continues deteriorating beneath the surface even as SPX keeps grinding higher. Going into today more than 5% of SPX components have hit 52-week lows on each of the last four sessions despite the index rallying roughly 100 handles. Outside of AI, momentum, and mega-cap tech, large parts of the market continue struggling badly, with retail, homebuilders, and restaurants all under heavy pressure. Historically, this type of extreme breadth divergence has tended to signal weaker forward returns. (BTIG)

Source: Bloomberg/BTIG

Correlation collapse

Implied correlation in SPX has collapsed to record lows, while the volatility gap between individual stocks and the index has widened to historically extreme levels.

Source: LSEG Workspace

Source: LSEG Workspace

Dot-com vibes

A similar setup emerged during the dot-com era, when single stocks were realizing 40–50 vol while the index itself traded closer to 20 vol. More here.

Source: JPM

Huge demand

“The appetite for semis/memory/AI-adjacent hardware continues to roar in our space, with no signs of where this tops out. Yesterday we were a better buyer in SOXX, VLUE (easter egg – the iShares value ETF is 34% semiconductors) and DRAM – demand for DRAM in particular is inexhaustible and last night saw the largest create on record go through with $1.7bn in new AUM, a truly incredible success story from a product perspective” (JPM sales)

Vol insanity

Looking beyond low VIX; some vols are at extremely elevated levels. SMH 3 month atm volatility at 100%tile. This is your spot up, vol up agony trade in a pic.

Source: Nomura

Chasing momentum

Retail didn’t just return—it flipped. Since mid-April, trading volumes are up 28%, while the Goldman “retail favorites” basket surged 29% in lockstep. Same playbook, same crowd, same reflex: chase momentum after the bounce. The twist? Easier margin rules mean this cycle may not fade as quickly as the last.

Source: Goldman

Aggressively hated

Downside protection is getting obliterated. Skew continues collapsing as the upside panic chase becomes increasingly stretched. We have not seen such an aggressive repricing of downside protection in relative volatility terms in a very long time.

Bullish or bearish, simple low-delta downside hedges have rarely been this cheap.

Source: LSEG Workspace

Down could get nasty

Index and vol-control rebalance projections are becoming increasingly heavy to the downside. Markets could start moving much more freely after tomorrow’s expiry as gamma begins to “unclench.”

Source: Nomura