NASDAQ-100 (USTEC) | Elevated risks arise Sentiment:
- Extreme Fear in the market (F&G = 23)
- Investors are bearish (49% bearish vs 37% bullish)
- Volatility elevated but not extreme (VIX 20)
- Higher Put activity and an elevated put/call ratio (1.11)
- Hedge funds unwinding crowded AI longs (50% market cap concentration)
- Record institutional options activity positioning for Q4 2025-Q1 2027
- COT report: No latest data due to the US government shutdown
Interpretation:
- Put hedge elevated = cautious as institutional hedging and distributing stocks to retail
- Extreme Fear + High Bearishness = Potential buying opportunity (later stage)
- When sentiment is this negative, often near bottoms
Fundamental:
- Valuation Concerns:
- 24-25x Forward P/E - vs 20-22 for 5-year average
- 3.08-3.37x P/S ratio - 2.35-2.41 for 5-year average
- Dec Fed cut probability is declining
Technical:
- USTEC broke the ascending trendline and EMA21, indicating potential mean reversion to EMA78, which is just above the support cluster at around 24000.
- Breaking below 24000 may prompt a decline to the following support cluster at around 23000, which is a prominent zone for sentiment contrarians step into the market if market fear remains at an extreme level.
My take on this:
- The distributing process may last for a while before reaching more extreme panic sentiment, prompting consideration of a contrarian approach based on technical levels.
- Therefore, we need to watch the price action to determine the best entry setup for the Long position. Then, for now, short-term pressure is the better take.
Analysis by: Dat Tong, Senior Financial Markets Strategist at Exness
