Editor's Note: Below is a brief excerpt from today's Early Look written by Macro analyst Ben Ryan. Click here to learn more about the Early Look.
When we look at our core, multi-duration signaling model next to explicit consensus probabilities gleaned from derivatives markets (think of the implied volatility premium factor), the squeeze in the FAANG components followed a familiar pattern of a stock that gets overbought within a BULLISH trend:
- A single security reaches the top-end of the @Hedgeye Risk Range
- Sizable implied volatility PREMIUMS grind into DISCOUNTS as volatility expectations compress
- Market beta follows a similar pattern to “1)” & “2)”
As we show in the Chart of the Day above (Our FAANG Factor Depth Monitor), the core FAANG components are still above their intermediate-term TREND lines of support and approaching the low-end of their immediate-term risk ranges.
