Nasdaq daily call option volume reached 3.9 million contracts, second only to the 4.3 million recorded in November 2025, and more than four times the volume seen in 2021. Over the same period, the index posted 13 consecutive winning sessions — the longest streak since 2013 — with a cumulative gain of 17.7%, ranking among the best 13-day performances of the past two decades.

This is no ordinary rebound. It is a frenzy driven by the convergence of sentiment and liquidity. As both retail and institutional investors pile into leveraged bets on tech stocks, the market enters a self-reinforcing phase: the more it rises, the more they buy; the more they buy, the higher it goes.

But history serves as a reminder: the most feverish chasing of highs often occurs near trend reversals. When everyone believes "this time is different," risks are quietly building up.

The U.S. stock market has recently staged a violent rebound, with the Nasdaq posting an 11-day winning streak to new highs. The previous three occurrences were: the early stage of the recovery from the 2009 financial crisis (panic short covering / aggressive re-entry), the melt-up at the end of the 2019 rate-cutting cycle, and the peak of the tech bull market in 2021.

The broader market has surged straight from 20,800 to above 24,000, leaving a massive vacuum zone between current prices and the short-term moving averages below. The underlying fuel for this rally has been mechanically triggered short squeezes from CTAs. As the trend broke out, CTAs were forced to enter, buying as much as $45 billion in a single week, while hedge funds are covering shorts at the fastest pace since March 2020. Once this several-hundred-billion pool of passive fuel is exhausted in the near term, a serious demand vacuum will emerge on the upside.

JPMorgan's Q2 collar defense signal remains evident, with the S&P 500 short call at 6,865.

Conclusion: Playing for lagging tech stocks (such as Microsoft) to catch up at these levels is extremely dangerous. When CTA buying dries up, the withdrawal of passive capital will leave no safe haven for any stock.

The latest CTA positioning data shows that trend-following funds' exposure to U.S. stocks has dropped to historically low levels, significantly weakening liquidity support. Goldman Sachs estimates that while CTAs still have room to add positions in the near term, a break below the key pivot level of 6,725 on the S&P 500 would trigger a passive selling cascade, with projected outflows reaching $761 million within one month. Investors should closely monitor the market volatility risks arising from this liquidity tightening.

A while back, someone shared a very interesting chart in the comments about long-term oil cycles. Before I had the chance to really digest the meaning behind it, the post was already deleted.

The core idea of that chart was similar — it showed the relative performance of precious metals, oil, and commodities versus stocks. Over the past 100 years, commodities have significantly outperformed stocks three times: the 1930s, the 1960s–70s, and the 2000s. These periods are closely tied to the Kondratieff cycles driven by technological revolutions.

• The 1930s was the turning point of the Fourth Industrial Revolution (the transition from frenzy to mass deployment).
• The 1960s–70s was the late stage of the Fourth Industrial Revolution and the dawn of the Information Revolution.
• The 2000s was the transition from the frenzy phase of the Information Revolution to mass deployment.

Right now, the excess return of precious metals, oil, and commodities relative to stocks is still in its early stages. Does the current AI technology cycle resemble the 1930s and 2000s more, or the 1960s–70s?

• If it is more like the former (1930s/2000s), then we may be facing a stock market frenzy followed by a crash.
• If it is more like the 1960s–70s (Chart 2: stocks experienced a seven-year topping process), then today's large language models might resemble the significance of the transistor for the Information Revolution. Because the technology is still early, the speculative bull market will not center around the technology itself, but rather around high-quality large-cap stocks — similar to the Nifty Fifty. Those companies' valuations eventually became unsustainable, only to normalize over a long downtrend.

My personal view is that this time may be more like the 1960s–70s: the ultimate form of AI is likely to be built upon current model and hardware developments, and the better-performing stocks will be high-quality large caps (like the Nifty Fifty) rather than speculative small caps. If this framework holds, then the current valuations of large caps still have room to run before reaching Nifty Fifty levels. At the same time, the supercycle for gold and commodities may have only just begun.

This chart is quite intuitive: the gray areas represent periods of a weakening US dollar, and the purple line shows the relative performance between international developed markets (distinguishing them from emerging markets) and US stocks. The area above the zero line indicates periods when international markets are outperforming the US market. You can clearly see the relationship: during periods of a weak dollar, overseas stock markets tend to perform better than US stocks. However, the recent period is an exception — the dollar has weakened, but the purple line hasn't moved above zero.

Over the past few decades, the explanation for this phenomenon, aside from the direct impact of exchange rates on returns (when the dollar is weak, overseas returns denominated in US dollars automatically gain a currency translation benefit), also includes an economic development perspective: periods of a weak dollar have historically coincided with accelerating overseas growth. The US dollar exchange rate is driven by two core factors: one is the interest rate differential — whether US interest rates are higher or lower than overseas rates — and the other is the growth differential — which economy is growing faster. During periods of a weak dollar, both of these things typically happen simultaneously: the US is in a rate-cutting cycle, and at the same time, growth factors are spreading overseas.

What's curious is the recent performance. This chart uses a three-year rolling window. The past few months may just be the beginning of the cycle, and the international outperformance hasn't yet shown up. If that's the case, shifting focus from US stocks to overseas markets would be very meaningful. Another possibility is that this is a very unusual cycle — at least an exception to the patterns of the past 50 years: most of the global economy is stagnating, and so is the traditional part of the US economy, with only the US tech sector standing out as a bright spot in the stagnation. Which scenario do you think it is?

ES daily chart / PLTR daily chart

Just a Chan Theory hobbyist sharing these charts. I'm not claiming to be right or wrong. Feedback and guidance from anyone who knows the theory is welcome. If you're here for something else, feel free to scroll past.

This chart primarily illustrates the long-term trajectory of U.S. stocks (S&P 500) from 1967 to early 2026, driven by the dual forces of valuation levels and corporate profit margins.

Core Takeaways

1. Strong Correlation Between Profit Margins and the Index

• Operating Margin (pink line): The operating margin of the MSCI USA Index is currently at an all-time high (approximately 15.0%). The chart clearly shows that every major rally in the S&P 500 has typically been accompanied by margin expansion.
• Double Effect: From 2020 to the present, the market has experienced a sharp margin expansion from 9.9% to 15.0%, which has directly supported the S&P 500's slope trending significantly above its long-term regression line (yellow shaded band).

2. Valuation Levels at Historical Highs

• P/E Ratio (green line): The current LTM P/E is approximately 23.2x. While below the 2000 dot-com bubble peak (29.0x) and the 2021 high (27.7x), it remains well above the historical median (approximately 15–16x).
• P/S Ratio (blue line): This metric currently stands at approximately 3.17x, still at extremely high levels. This indicates that investors are willing to pay a higher premium for each dollar of sales, reflecting optimistic expectations for future growth or the increasing weight of technology stocks.

3. Trend and Deviation

• Long-term Channel: The yellow shaded band represents the S&P 500's long-term logarithmic growth trend. The current index level (near 7,680) has clearly reached the upper edge of this channel, or even slightly broken above it, suggesting the market may be overheated or pricing in an overly perfect future outlook.
• Macro Cycles (background colored vertical bands): Blue shaded areas typically correspond to undervalued/recessionary periods, while red shaded areas correspond to overvalued/overheated periods. The right side of the chart currently shows dense red areas, indicating significant valuation pressure at present.

Conclusion:

The current S&P 500 level is being driven higher by a combination of extremely strong corporate profitability (15% profit margins) and expanded valuation multiples (23x P/E) . While this "high profit + high valuation" combination is powerful, it also means the market has a low tolerance for any margin compression or valuation contraction (e.g., from persistently high interest rates).