Still Calling 8K After Friday?

Between the Lines - Vol. 10

Good morning,

Last week I wrote that the underweight money would probably get stopped into the market, and that the easiest mistake was to confuse “stretched” with “sell”. And then Friday happened, and my weekend inbounds have all been similar questions…

Was Friday the top? Is this the start of something bigger? Was NFP the thing that finally mattered? And so forth.

I think the more important point to take away from Friday is that the AI trade did not die, it just changed category.

NFP caused Friday, I'm fairly sure of that. I sat there watching my PnL get worse by the minute, asking why, after that print, I hadn't bought 0DTE downside. I am still waiting on the answer. AVGO had already made the week feel heavy, and the GOOGL raise added a question nobody fancied dealing with on a Friday. So no, it wasn't a random red candle. The market was standing on one leg and got handed a rates shock, a soft print from a key AI name, and a wall of cost of AI headlines, all at once.

And yet even with all of that, it didn’t look like true panic. I think it was just a stress test where people managed risk via short-dated puts (QQQ+SPY had the highest put volume day in history). To put it bluntly, people haven’t dumped the whole AI trade from one Friday; they just hedged up and then cleared up any positions they didn’t fancy anymore.

To put this in simple terms - if people sell the thesis/narrative - you have a top. If people hedge the thesis/narrative, you just have a positioning problem.