Emptying the Notebook on the First Full Week of Q2
Plus, the Final 4 and Championship round of our Market Madness bracket
Hello friends. A scattered Substack for you today, kind of fitting given how gamey everything seems with the market. Are we in the clear? Is this a pump fake? It all feels very, Birdboxy.
But hey, it’s Masters week, and the similarities between golf and options traders are too many to name (noticing the trend yet? the intersection between sports and stocks?).
I got a kick out of this Reddit thread and I think you will too:
Anywho, the University of Michigan (yuck) consumer sentiment got all the airwaves to end the week (rightfully so), but three other sentiment signals are doing something just as wild.
For the American Association of Individual Investors (AAII) weekly survey, its now the eighth week in a row with Bears outnumbering Bulls. This is the longest streak since the Liberation Day lows of spring 2025, 2025 where we had fifteen weeks in a row.
The Nasdaq and S&P 500 10-day put/call ratios are also at their highest levels since November 2023.
A whole lot of negativity for an administration that pretty clearly loves the TACO trade. April 2025 was not an outlier, but the start of a pattern; the President cares too much about the stock market to let it really bottom.
Mind you, all of these surveys came before Wednesdays ceasefire. But as long as stocks don’t get too overvalued again, any type of official ceasefire news could be a checkered flag being waved for investors.
Stay ready so you don’t have to get ready.
Market Madness: Final 4
This is it folks, what the madness is all about. Four ‘regional’ champions facing off in the Final 4, for the right to play for the championship. Maybe I’ll make a One Shining Moment next week of all my favorites. Let’s take a look:
Delta Champion
#2 AMZN 0.00%↑
Gamma Champion
#2 AVGO 0.00%↑
Theta Champion
#2 TSLA 0.00%↑
Vega Champion
#1 MSFT 0.00%↑
That’s a lot of market cap firepower..
Amazon.com vs. Broadcom
Amazon stock just formed a double bottom, and is testing a former peak from last summer. Broadcom stock has broken out of a downtrend, like predicted. Both are near “overbought” territory, but nothing too alarming. Amazon was just added to William Blair’s Conviction List, and I see why, with rumors of its chip business drawing buzz.
Factor in a put/call volume ratio in the 98th and 100th percentile across 10- and 50-day timeframes, there’s room for AMZN to run.
Tesla vs. Microsoft
A classic case in looking beyond the numbers. On paper, Tesla has massive contrarian potential; analyst skepticism, a growing put skew in the options pits, and near ‘oversold'‘ relative strength.
But then you read the headlines. EV delivery numbers came out this week, and they were brutal. Reports of introducing a lower-cost EV could boost volumes but stretch already razor-thin margins. TSLA breached its 320-day, and while its long term 24-month trendline is stepping up, the quantitative signal is weak; such a pullback has only occurred one other time. That’s not enough of a sample size to go off of.
Microsoft has its own problems and hasn’t fared much better, but has at least bounced off its bottom at $355. TSLA options are cheaper, but what’s the point in value if the stock setup isn’t ideal?
Market Madness: Championship
A boring clash of Big Tech is not what I expected when I started this three weeks ago. But the kings stay the king, I guess. Since I’ve already gone over the technicals of both stocks ad nauseum, let’s crack open the options tape.
Looking at open interest, November 550 calls are the most popular for MSFT. There are some June 420 calls — remember June was the hypothetical month I chose for a call option — in the top 20. But overall, nothing that stands out.
For AMZN, LEAPS are the most popular open interest trades. June 220 puts are also in the top 20, with $220 an area of former support since a February 6 post-earnings bear gap of -5.6%.
Given the amount of AMZN puts that could unwind and the larger overall put skew, plus the double bottom formation, I’m going with Amazon as the official winner of first-ever Schaeffer’s Market Madness.
Jeff Bezos is inevitable.
Phew. That was a lot. Honestly, I got a little out over my skis at times during the whole bracket. I also realized that you get down to the final eight stocks or so, compelling cases could be made for any of the names. And so much can change in a week; I would probably re-do some of my picks from earlier now.
Overall though, this was a fun way to endorse Expectational Analysis. Forcing yourself to pick between two stocks really drills down on technical areas that would otherwise be glossed over. Hypothetical paper trading has its merits!