Chip rebound has one trader buying protection
Chip stocks are bounding back Monday, but the rebound doesn't mean tech investors are in the clear.
The PHLX Semiconductor Index (SOX) suffered its fifth-largest single-day decline in history. When a sector that has effectively anchored the entire macro tech narrative moves with that kind of violence, we shouldn't treat it as routine noise. To understand the gravity of Friday's move, you have to look at the other four instances on this infamous leaderboard:
The Tech Wreck (March 2000): The top spot belongs to the opening bell of the dot-com bear market. Within that multi-year unwinding, the SOX suffered two more gut punches of more than 10% on a single day in October 2000 and July 2002.
The Pandemic Plunges (March 2020): The index shed nearly 11% on March 12th and a staggering 16% on March 16th as global liquidity evaporated.
And now, we add last Friday to the list.
The defining characteristic of the current market regime is speed. Whether this history-making drop marks the inception of a structural cyclical correction, as it did in 2000 and in the period that immediately followed, or simply an aggressive liquidity flush, the path forward will not be a straight line down. I distinctly remember late-stage tech bubble volatility going higher even as equity prices hit new highs.
Pullbacks are healthy, but this kind of price action isn't particularly. The whole saga reminds me of the age old adage: buy protection when you can, not when you need to.
