McCullough: Why the Semis Rally Is More Fragile Than It Looks 🔊 On Monday's edition of The Macro Show, Hedgeye CEO @KeithMcCullough explained why the semiconductor rally is more fragile than it looks and why he expects the Fed's next move to backfire. McCullough's point on the flows, the recent semis rally has been perpetuated by mechanical buying rather than conviction. As volatility came off the lows last week, volatility-control funds were buying the index, and with semis a heavy index weight, that flow carried the group higher. The risk is that it reverses. If one-month volatility breaks back above three-month, and CTAs start selling, which the morning's Tier 1 Alpha review suggested had already begun, anyone chasing semis into that flow has a problem. The macro backdrop is a Fed hike landing right at the top of the Risk Range™. The catalyst for the next cut will be the hike itself, which inverts and, in his words, "pancakes" the yield curve, exactly what is already happening. We expect the outcome to be messy. Subscribe to The Macro Show for daily market insights you won't find anywhere else:

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Rising bond yields are meeting fragile options positioning. Both $QQQ and $SPY are in negative gamma, but SPY stands out with -$755.6M Net GEX and a major $765 gamma wall. A break could amplify volatility through dealer hedging.