Brent Kochuba Just Got Long Tech. He Says This Selloff Is Rotation, Not a Crash. — watch on tastylive
Brent Kochuba, founder of SpotGamma, joined tastylive to work through why the tech pullback looks like rotation rather than broad de-risking, which measures would change that read, and how he is positioned for a bounce.
Rates are pushing higher, war headlines continue to come and large-cap tech is wobbling, yet the S&P 500 still sits close to its all-time high. Brent Kochuba, founder of SpotGamma, joined tastylive to explain why this tech selloff reads as rotation rather than wholesale equity selling.
Tech Selloff Rotation Shows Up In Breadth
Equal-weight S&P 500 (RSP) and the Dow Jones have held their ground while large-cap tech names took damage last week, which looks more like money moving between sectors than a broad exit from equities. An index sitting about 2% from a record after a week of rates, geopolitics and tech weakness signals that the selling has stayed narrow.
Correlation And Term Structure Have Not Turned
There are two key measures to watch at this stage. The first of these being the COR1M, the one-month correlation metric, which tends to climb when index components start moving together and single-name stories become less relevant. The VIX term structure is the second, and it came close to flat on Friday before traders sold front-month volatility again. Until those two turn, the pattern of the past six months — downside bought back quickly — remains the working assumption.
Right-Tail Risk Cuts Both Ways
All the while, risk appetite has not faded, and it appears to be waiting for an excuse. A rumor around Elon Musk’s companies or a strong quarter from Meta or Tesla may be enough to bring equity buying back before year-end, and a market that rallies 5% to 10% higher would hurt short positioning as much as a flush would hurt longs.
Short-Dated Call Flies In QQQ
Brent rotated out of consumer names into tech during last week’s selloff and walked through 1-2DTE call butterflies in QQQ, roughly 1% wide, as a cheap way to position for a bounce. QQQ can cover 1% to 2% quickly, so a tight structure with limited premium at risk fits that move better than owning outright bullish trades. If VIX gets sold from here, vanna will come into play also: falling implied volatility shifts dealer deltas, and the hedging that follows can push the index higher.
Confirmation: Watch COR1M and VIX Term Structure
We encourage traders to watch two things into the end of the week: whether COR1M lifts as index components begin trading together, and whether the VIX term structure inverts into backwardation. Meta & Tesla earning, and the FOMC decision, sit in front of the market and new information of that size is a reason to adjust the read rather than defend it.
Watch the full segment on tastylive.
SpotGamma’s Founder’s Note lays out these structures each morning before the open.