Key Takeaways:
A frenzied chase for technology and semiconductor stocks pushed bullish options betting to an all-time high, with a Goldman Sachs trader warning that the market has entered a "semi-irrational chase-up mode."
"The market has fully entered spot up, volatility up, chase-up territory," Brian Garrett, a trader at Goldman Sachs, said in a note. The warning came as the nominal value of S&P 500 call options traded in a single day exceeded $2.6 trillion for the first time ever.
The data points to extreme bullish positioning, with nearly 60 percent of all S&P 500 index options traded being calls. The volatility of the Nasdaq 100, tracked by the QQQ exchange-traded fund, climbed sharply, widening its spread over S&P 500 volatility to more than six points. Underscoring the frantic activity, 35 individual stocks within the S&P 500 experienced moves greater than three standard deviations.
The core narrative driving the rally remains the massive capital deployment into artificial intelligence infrastructure. However, the semiconductor sector's weekly Relative Strength Index (RSI) has now hit its highest level since 1999, drawing stark comparisons to the dot-com bubble and signaling that "obvious risks are building," according to Goldman Sachs.
The parabolic advance in semiconductor stocks is raising red flags across Wall Street. The SOX index, a key benchmark for the sector, now has a weekly RSI reading at its highest point in over two decades, a level last seen just before the 2000 market crash.
Market participants are drawing parallels to the 1999 boom, when a "tangible bottleneck narrative" around telecom equipment orders fueled a similar surge. Today, the scarcity of high-end AI computing power serves the same role. Bank of America noted that the current S&P 500 rally is reminiscent of the late 1920s and the dot-com era, yet the pricing for options that protect against tail risk remains low, showing a clear divergence from the realized volatility.
Away from the tech euphoria, a starkly different picture is emerging in the consumer economy. Appliance maker Whirlpool (WHR) saw its stock plummet 16 percent after management described the environment as one of "rapidly deteriorating macroeconomic conditions" and announced "decisive actions" to restore profitability, including price hikes and cost cuts.
In sharp contrast, food delivery firm DoorDash (DASH) reported a "strong start" to the second quarter with "continued strong demand," sending its shares up about 10 percent. "The consumer hasn't disappeared, they've just become highly selective," a Goldman trader summarized. "Maybe they're not renovating, but they're still ordering takeout."
This article is for informational purposes only and does not constitute investment advice.
