11/21 S. Korean stocks fall, U.S. options expiration date, CTA funds

Looking at the recent trading behavior, the number of orders that can be immediately concluded at the current price in the U.S. S&P 500 futures trading is only 40% of the average over the past year. This means that the remaining asking volume is not large, so the asking price volatility (index volatility) can expand even for small sales.

In the meantime, the CTA fund had been selling off since last week. Meanwhile, a mechanical sell-off flowed as it fell below the 6,725p support level based on the S&P 500. The next support line is 6,450p. Some, including Goldman Sachs, are suggesting a global $39 billion ($16 billion in the U.S.) stock sale. They say that if such a volume is released while the backlog of asking prices is not large, increasing the volatility of the index is inevitable.

Meanwhile, the AI profitability controversy did not immediately lead to the collapse of the entire market. Instead, the market opted to “cover up” large technology stocks with strong cash flows, while companies with weak financial structures fell sharply, intensifying their differentiation. However, this is also not a matter of confidence. This is because the later the profitability verification is delayed, the more likely it is that big tech will conservatively reduce capital expenditures. This raises doubts about the sustainability of the ‘semiconductor super cycle’ and can act as a key factor in slowing the upward elasticity of the semiconductor sector.

In the end, the U.S. stock market deviated from the main support line due to the double whammy of fundamentals (AI concerns) and supply and demand (CTA selling + lack of liquidity). In particular, today is the expiration date of U.S. options, and the combination of mechanical selling and position liquidation could lead to increased volatility during the day. There may be attempts at a technical rebound due to excessive short-term falls, but a conservative response focusing on “variability management” rather than a trend rebound seems to be needed as the selling pressure of the CTA has strengthened.