To The Moon

Tech Stocks Pullback, Where Did the Money Go? Look at the $iShares Russell 2000 ETF(IWM)$

The long-awaited tech pullback has finally arrived. Yesterday, the Nvidia weekly $130 and $125 puts saw a surge in open interest, suggesting the stock will likely settle above $120 for this week and next. As a result, one can look to sell some Nvidia $125 puts$NVDA 20240719 125.0 PUT$  , or the $120 strikes for a more conservative play.

For Apple, I would continue selling puts. The $225 strike looks viable $AAPL 20240719 220.0 PUT$ , or the $220 puts for a safer stance.

Tesla's range is quite wide at $245-$275. After the pullback, the $275-$300 call options will become worthless. So for next week, the key upside strike to focus on is $250. My plan is to sell the $245 puts on Tesla. $TSLA 20240719 245.0 PUT$ 

As for where the money rotated, we're seeing significant inflows into the Russell 2000 ETF (IWM) which tracks the small-cap index. The IWM saw over $1 billion in buy flows yesterday as funds diversified away from the mega-cap tech leaders into the more economically-sensitive smaller names.

This fits the typical market cycle pattern - after extended outperformance by the tech/growth trade, we tend to see reversals and rotations into areas that lagged during the prior trend. Small-caps, along with financials, industrials, materials and energy, are starting to see renewed interest.