UBS high-touch flows opened roughly 2:1 better for sale, driven by hedge funds at 23/75/2 buy/sell/short sell, with the sharpest selling in Tech, particularly Memory and Semis.
Long only flow is providing a counterweight at 55/45 net to buy, but the spike in VIX alongside the sell skew points to a meaningful risk reduction underway.
The clearest sign of capitulation is in Neoclouds {UBXXNEOC Index} and Semis {UBXXSEMI Index}, in what looks like a delayed reaction to yesterday’s election results. Retail supply is also showing up in Tech, while the timing of the SOXX stock split is notable against the move.
The selloff over the past 30 minutes also appears futures-driven.
Hyperscalers {UBXXHYPE Index} are giving back some of yesterday’s gains, adding pressure to the broader indexes.
Risk Control rebalance estimates point to selling of $95-105 bn on a 2% SPX decline and $50-55 bn on a 2% rally.
A move of +/-1% implies roughly $15 bn of selling, while a move of +/-50bp implies $10-15 bn of buying.
“What a difference a day makes…” says Goldman Sachs trader John Flood offering some more color:
Yesterday was one of our busiest days of the year on the equities trading desk (from a number of trades and notional executed perspective).
Today is the exact opposite. Our phones are exploding with asks for color. Unfortunately we aren’t seeing much.
The long only community is frozen (again). There was massive desrisking into midterms and traders were surprised by yesterday’s move and got sucked back in. HFs selling back pockets of the market (hyperscalers) that they bought yesterday.
We are not seeing buyers step in to defend anything just yet. Clients telling me brokers with heavy retail presence are saying 2nd day of very noteworthy sell skews.
This feels like top-down pressure being applied via macro instruments. SPY volumes +160% vs. 20d, QQQ volumes +100% vs. 20d, SMH volumes +150% vs. 20d, DRAM volumes +75% vs. 20d.
This feels like a lot. It is always darkest before dawn.
Continued semis pressure as a result of the view that by 2028 we won’t have enough Data Center shells (land, power, shell)…and…therefore, we will likely have too many semiconductors and not enough ‘datacenter shells’ for them to go into.
Also acute pressure in…
* E&C stocks (construction of Data Centers)
* IPPs / Power — especially those with TX exposure GA and OH exposure
* NeocloudsGiven concerns about a bottleneck in Land/Power/Shell due to permitting, the risk of too many semis and not enough ‘shells’ is making traders cautious on the memory co’s that have really taken price (ASPs) and benefitted from bottlenecks and huge S/D imbalances (namely Memory stocks – HDDs, DRAM, NAND)
Multiples contracting meaningfully as investors worry the 2028 GWs added could be closer to flat y/y with 2027 than the >30% y/y GW (or capex) growth in 2028 that investors had been anticipating at the top of the cycle.
All in all – a shitshow as the reality of the blue-nami comes home to roost after rotation (check receivers to check writers) and hedge unwinds (vol collapse) saved the day yesterday.
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