On 05/20, $Micron Tech(MU.US)'s CEO Sanjay Mehrotr

On 05/20, $Micron Tech(MU.US)'s CEO Sanjay Mehrotra publicly emphasized that "the company's balance sheet has never been stronger," reiterating that the demand for AI memory is a structural, long-term trend, which spurred a pre-market stock price surge of about 5%. Donald Trump's fundamental stance on the US controlling advanced manufacturing technology remains unchanged. As the most advanced domestic memory chip manufacturer in the US, it's really hard to find even a sliver of cause for concern. But the stock price has already surged significantly, so what is the current market state?

The top-right chart shows the short-term Put/Call volatility spread trend. The current trading sentiment has completely eased from the extreme, overwhelmingly bullish atmosphere.

The volatility spread has returned to the zero line and above. Short-term options even show a value of +7.8%, beginning to approach the long-term benchmark (Put volatility is 10% higher).

I believe the market won't return to the completely bullish state seen on 05/11 anytime soon, as such a state has only occurred twice in the past year. Perhaps the next occurrence will be in the second half of the year.

The bottom-right chart plots the Put and Call volatilities separately over the past year. The green line is Call (bullish), and the red line is Put (bearish). Although both volatilities have declined significantly, they haven't yet returned to the pre-earnings benchmark, so we estimate they will continue to fall.

Approaching 60% is considered a low volatility position unaffected by earnings reports.

The top-left chart is a correlation analysis between stock returns and volatility. I've mentioned before that every complete upward wave experiences an alternation from strong negative correlation to strong positive correlation.

This wave started rising in April, with a correlation coefficient of -0.5 at the time, and the red line (Put) showed an even more negative correlation. After this round of increase, the stock price formed a head-and-shoulders pattern, while the correlation coefficient also completed a more distinct head-and-shoulders pattern at a strong positive correlation (+0.75).

Once the correlation coefficient shifts from negative to positive, it often signals the end of a wave and a transition to range-bound consolidation. Historical data suggests a high probability of a temporary pause, though not necessarily a decline.

The bottom-left chart is the daily position change chart. This chart shows that only very near-term options have new bullish opening positions. The entire chart indicates that bearish option opening is more active. This is a completely different situation compared to the all-in bullish bets seen recently.