Good Morning! In a day where all but one sector was green, SPX closed down .6%.
What would a rotation out of AI and tech be from? There was a Citron report about how overvalued PLTR is, but does that read through to all of AI? On the face of it, I doubt it, but I think that report just confirmed what we already knew, AI might need quite a bit more development and monetization to justify these lofty valuations. Whenever there is a new technology coming out, it is undervalued at first, bubbles up as it matures, goes through a crash, then slowly and surely recovers as the realistic monetized applications are realized. A good past example is the internet or automobiles.
6440 was identified as tentative support while the 6400 “rapid drop” level was saved. What are we looking at now?
This week’s vanna is still negative, which is concerning considring there’s a lot of event vol for Friday’s JackHole speech. Markets would need to rally to 6450 to feel a bit safer with 6400 possible pin level below if JackHole doesn’t move the needle. If JackHole is bearish, 6375 is the level it must maintain, or we start looking at vol events.
For all expirations, the 6350 level is where support begins, but we can still see a drop towards 6275-6300 before you can buy the dip on a swing level. As we drop past 6350-6375, I’d want to start seeing some overvixing, if not a vol event.
However, there is a distinct possibility this is a bottom area, but I wouldn’t play it like that until we reach those levels below. I think there is a decent chance JPow will dump ice cold water on the prospect of a rate cut this year on Friday, so I would be careful being overly bullish right now.