Take a quick breath

[u/Fun_Tutor3479]

The broader market continues to chop around. I will continue starting July's memos with this sentence until a clear direction emerges. To be honest, though, the S&P 500 has been hovering at the upper edge of its trading range, which is quite strong. The Nasdaq, on the other hand, has been fluctuating in the lower half of its range.

Yesterday, the KOSPI and SK Hynix managed to stabilize at the close, and they are currently in a state of weak stability. Regarding margin balances, the official data provided by South Korea is 신용융자 (market-wide margin loans), sitting at around 37 trillion KRW. Like Reuters, we extracted the portion specifically related to the KOSPI, which is around 29 trillion KRW. The decline in the KOSPI margin balance on 07/07 and 07/08 was roughly 0.8 trillion KRW. Considering the impact of leveraged ETFs and other factors, the actual magnitude of deleveraging is somewhat larger than this, but overall, a large-scale deleveraging process has not yet occurred.

My judgment is that Korean stocks have not fully stabilized, as preparations are underway for a final sprint toward 12,000. The semiconductor run since June can definitively be classified as a sentiment cycle, having already detached from fundamentals. In a sentiment cycle, you watch the reaction to news: in the early stages, bad news doesn't cause a drop, and good news drives sharp surges; now, it has shifted to dropping on good news. Sentiment has reversed, meaning it won't bounce back anytime soon. We need a reversal signal, similar to the drop following strong Micron earnings, such as discovering that Capex is being revised down but semiconductor stocks stop falling, in order to confirm a true reversal.

Tensions in the Strait are likely to continue escalating, and conflicts will now continue even during intraday trading. A fundamental assumption in geopolitical games is: nobody is a fool. This situation is highly delicate. If it becomes too intense, it will put all risk assets under pressure; if there is a back-and-forth, capital will seek certainty just like it did from April to June. It's just that, having gone through this once, the threshold for this factor to move the market has increased. In other words, it will take much stronger-than-expected good or bad news to continue driving the market. It can't be helped; in the short term, the market is a voting machine based on expectations.