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Posted May 6, 2026 at 12:49 pm
Regular readers will notice that I haven’t written any new strategy pieces this week. (Shame on you if you haven’t!) I’ve been traveling on business this week to attend the annual Options Industry Conference, where I moderated a panel discussion about volatility as an asset class. That’s an esoteric topic, and one that will likely get an article of its own in the coming days. Today, instead, I’ll give a brief recap of some of the many conversations that I’ve had so far.
The key topics of interest to attendees are (1) the ongoing shift to ever-shorter expirations, particularly now that the industry has added sub-weekly single-stock options, (2) the potential expansion of options trading hours to 7:30 to 4:15 ET or beyond, and (3) the explosive growth of prediction markets and the exchanges’ response by proposing to expand their offerings in binary options.
The broad market discussions have a very distinct generational breakdown. There is MUCH more skepticism among older attendees than younger ones.
The vertical move in semis, while quite easily explained by better earnings, also makes many wonder whether the 40%+ rally in SOX in just a few weeks raises the question of whether we were mispriced before, are mispriced now, or some of each. I say it’s some of each – the earnings and guidance have been very good, but much of the guidance improvement has been for next quarter, not the long term (AMD is an exception). Remember also that semis are historically quite cyclical.
I just learned a cool fact – current corporate AI budgets are being allocated 93% to IT infrastructure and only 7% to Human + AI Design. It means that the AI build-out is outpacing our ability to implement this technology properly. As long as that trend persists, so do the tech rally and the capex boost to GDP. If that spending mix changes from buying the technology to using it profitably, then we have a problem.
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Stock market bubble update: S&P 500 market cap now $66.78 Trillion, of which the top eight tech stocks are more than $25 trillion. Here is another warning sign: When the Nasdaq peaked in 2000, the price of the QQQ was 78% of the SPY. The QQQ is now 95% of the SPY (!!!) Amid the mania and all of the analysts raising their targets, I am keeping my prediction that the S&P will see MUCH lower prices again. The S&P will see 5500 again, possibly 5000 or 4500, but 5500 is a lock. The QQQ will get demolished.
It is not if, but when.
That prediction would be more meaningful if a time frame was provided. Not averse to a healthy 10% correction myself.
I believe Steve estimated 6500 by Q4 of 2026. Steve can correct me if I am wrong. My memory isn’t what it used to be.
I noticed your absence, Steve. Glad you’re back!
When a “correction “ begins it is never certain 1) that it has begun, 2) whether it is a couple days blip, a correction, or worse, and 3) just how long it will take to get to the other side. For some, they have a hard time accepting that it will at some point be over, although it always will. For me, it is best to sell a bit along the way, than to regret watching all the gain dissipate. So I sold off 75% of my MU this spring, I don’t expect to cry about what got away.
Those are good points and a good policy. Taking profit is a good way to keep profit. I tend to trim in smaller lots on the way up. For my positions that are especially volatile, yet have gone parabolic, I’ll take profit in small lots until I’ve taken the equivalent of my initial investment plus around 50%. Everything after that is profit at any price.