Capitulating or bottoming

The KOSPI selloff overnight was hardly unexpected given Friday's semiconductor meltdown. The index sliced through the short-term trendline and closed well below the 21-day moving average, marking a clear deterioration in the technical picture. For now, the 50-day moving average remains intact and represents the next major support zone.

SK Hynix represents the Asian AI mania on steroids. The stock plunged overnight (again) on heavy volume, closing below its 100-day moving average for the first time since May 2025. While the longer- term uptrend remains intact, the next major supports don't emerge until the long-term trendline and the 200-day moving average.

Eating liquidity Leveraged ETF turnover as a share of cash equity turnover has exploded in Korea's AI champions. The associated rebalancing flows increasingly resemble a large synthetic short-gamma position, amplifying market moves and draining liquidity during periods of elevated volatility.

Credit is finally attracting attention, but this has been developing for some time. SOX and Nvidia 5-year CDS remain locked in an almost perfect inverse relationship.

One of the biggest speculative manias of late 2025 and early 2026 was silver. While every bubble has its own catalyst, the underlying market structure tends to evolve in remarkably similar ways. The KOSPI followed a strikingly familiar path. Chart 2 compares silver with silver implied volatility. It illustrates the same feedback loop now playing out in Korea: rich option premiums encourage theta selling, suppress implied volatility and, through dealer hedging flows, reinforce pressure on the underlying market. The mechanics are different, but the playbook is remarkably similar. More on Korea here.