CNBC International Live Sep 18, 2026
With Farzin Azarm, Managing Director of Equities Trading at Mizuho Americas
Technology funds have been net buyers of technology in 10 of the past 11 sessions, which puts hedge-fund positioning in the sector close to the 97th percentile of the last five years. The S&P 500 is less than 3% from its record.
The usual reading of an index that close to a high is that nothing is wrong. Farzin Azarm's reading is that the quiet is the warning, and that one mechanism is holding the whole thing together.
"And believe it or not, underneath the hood, it looks very scary."
Azarm has traded risk for 32 years and runs equities trading at Mizuho Americas, and he pulled prime-broker positioning data before coming on air.
The full segment is covered here so you can skip it.
Here are the 6 calls that matter.
Key Takeaways
Sector rotation is what has kept the index up, and it stops working on the day every sector falls together
Hedge-fund technology exposure is near the 97th percentile of the past five years, with tech funds net buyers in 10 of the last 11 sessions
Wells Fargo cut its S&P 500 target, the first target cut Azarm says he has seen, and Ed Yardeni followed the next day
The day's selling came from systematic funds, not people, and those funds are now positioned to sell
Volatility funds are long almost $190B of equities, which they would have to sell to pay for protection
The S&P 500 is under 3% from its high while, on his reading of positioning, the market underneath looks far worse than that
1. The Technicals Broke Today
The host opened by asking whether global equity markets have an adjustment problem in a higher-rates environment and whether correction risk is building. Azarm said it is. He walked through the day's chart damage: the S&P 500 tried to hold its 50-day moving average and closed a little below it, the Dow Jones closed below its 100-day, the transport index was sold off hard after a J.B. Hunt warning, and the Nasdaq 100 broke a moving average of its own.
The charts stopped cooperating
So technically things are not looking good.
Farzin Azarm
2. The Bond Market Speaks Last
Azarm's framing for what eventually forces equities to reprice is the cost of money rather than anything in the equity market itself. He said he has been making the point for some time.
Higher yields eventually get an answer
I think, and I've been saying this for some time, that eventually the bond market speaks very loudly and the markets will react.
Farzin Azarm
What has surprised him, on 32 years of risk trading, is what has happened instead of that repricing.
Rotation has done the work a sell-off would have done
This rotation is really saving the market.
Farzin Azarm
3. Brokers Trim Their Targets
Two forecast cuts are the first cracks Azarm has seen in an almost uniformly bullish set of sell-side targets. Wells Fargo trimmed its S&P 500 target the day before, and Ed Yardeni, the president of Yardeni Research, did the same that day after a long-standing bullish call.
Wells Fargo went first
One is Wells Fargo trimmed their S&P target yesterday.
Farzin Azarm
And before that nobody was cutting
This is the first that I've seen anybody trimming their S&P target because most brokers have been high, right?
Farzin Azarm
The host put the other end of the range to him: whether 8,500 on the S&P 500 is the most bullish forecast on the street, and whether it is credible.
The host asked whether 8,500 is credible
Is that really objectively realistic?
A host
Azarm's answer was "Not even close."
4. The Systematics Are Selling
On Azarm's account the selling that day was mechanical. The tape was quiet, trend-following commodity trading advisers were leaning the wrong way, and the flow came from rules rather than from decisions.
The sellers were programs, not people
It was all systematics that were selling very aggressively, and right now the systematics are positioned to sell the market.
Farzin Azarm
That matters more to him because of who else is on the same side. Prime-broker data he read before the segment showed technology funds as net buyers of technology in 10 of the last 11 sessions, which puts the exposure close to the 97th percentile of the past five years.
His largest worry is crowded technology
My biggest fear is that hedge funds positioning is very high in the tech.
Farzin Azarm
And the index does not show it
And we're just not even 3% off all-time highs.
Farzin Azarm
5. What Breaks the AI Trade
The host set out the case against the momentum trade in one question: public opposition to data centers, Chinese competitors closing the performance gap, the chance of a credit event, circular financing between the companies paying for the build-out and the companies supplying it, and the ethical objections.
The host's list of what could end it
I think it begs the question, doesn't it — are the wheels therefore going to fall off the momentum tech and AI trade given the public opposition to data centers, given the China competition, which is very real.
A host
Azarm took the same side.
He agreed that is the risk that worries him
I absolutely agree with you. I think that is the biggest fear that I have.
Farzin Azarm
6. Volatility Is Priced Too Low
His evidence that nobody is hedged is the price of protection. Azarm said he looked at the VIX, the skew index and S&P 500 implied correlation before the segment and found all of them cheap, and that a market this calm is what makes him uneasy rather than comfortable. Volatility funds are long "almost 190 billion" of equities, and buying protection would mean selling some of that stock to pay for it.
He also pointed at the tick index, which measures whether retail money is chasing the market. It reached plus 400 as the market rose and minus 1500 as it fell, in the same session.
Small moves now trigger sentiment trades
The positioning in these markets, it's so lopsided that in every little movements, it's a sentiment selling or sentiment buying within the markets.
Farzin Azarm
His conclusion
But yes, I think a serious correction is coming.
Farzin Azarm
What keeps the index up in the meantime is the same mechanism he named at the start.
Rotation holds until it does not
And that is what's saving the market, from one sector to another, until something really breaks and everything goes down at the same time.
Farzin Azarm
Bonus Insights
The rotation had specific names that day
Money moved into optical networking, the neoclouds and semiconductors while energy and IT services were sold. Azarm's point is that the money stayed inside the equity market rather than leaving it.
The signal he is waiting for is breadth
Azarm said the measure he keeps coming back to is how many sectors are down at once. He wants a day on which declining stocks overwhelm advancing ones by a wide margin, and said he has not seen one.
Azarm's bottom line is that a correction is coming and that the only reason it has not arrived is that money keeps moving between sectors instead of leaving equities, which is a condition that ends rather than a floor.
Products, Companies & Tools Mentioned
Mizuho Americas (Azarm's firm, where he runs equities trading and reads the prime-broker positioning data he cited)
Wells Fargo (Trimmed its S&P 500 target the day before, the first target cut Azarm says he has seen this cycle)
Yardeni Research (Ed Yardeni cut his own S&P 500 target the same day, which Azarm flagged because the call had been consistently bullish)
J.B. Hunt (Its warning was what Azarm said sent the transport index down on the day)
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