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Moon Hong-cheol, head of asset strategy, said today's market closed in the green but the mood was poor, calling this gain a disappointing one.

The host asked what caused this sense of disappointment, and Moon noted that opinions differ on the key forces moving the market: supply and demand, sentiment, and liquidity.

Moon named CoreWeave's funding cost as the most important recent indicator. Funding cost is the corporate bond yield, and adding the US 10-year yield and CoreWeave's default risk (CDS) should roughly equal the corporate bond yield.

Through mid-to-late September the two spreads held steady at around 50bp. After September 22, however, cracks appeared, and the gap widened from early October.

As Treasury yields fell, tech stocks and funding costs stabilized together in a virtuous cycle. Moon read this as a signal of market stabilization.

This kind of positioning information is provided in real time to subscribers of the firm's materials.

Moon's view is that how well a stock absorbs and withstands a piece of news matters more than the news itself. If a stock lacks strength even on good news, selling is right; if it doesn't fall on bad news, buying is right.

CTA's short position in US Treasuries is recently around -2, and on a distribution centered on zero, -2 sigma is an extreme position. Moon placed it outside 2 sigma, while noting that the numerical interpretation needs confirmation from a statistics expert.

Citing Citadel's data, he argued that hedge funds are holding large short positions in US long-term bonds. If this position becomes excessive, short-covering becomes possible and downward pressure on yields grows.

In a situation where everyone talks about rising yields, a short squeeze could actually push yields lower, he explained, and he used this to explain why yields fell even after the CPI and PPI releases.

The policy rate and market yields are separate, so market yields can fall even when the central bank raises its policy rate, much as Samsung Electronics' share price can fall even when its earnings are good.

There is no need to believe the central bank reads indicators accurately and is conducting good policy. He criticized relying on data such as employment and GDP, pointing out that such indicators are later revised.

As with the European Central Bank raising rates two months before the 2008 Lehman Brothers collapse, it is not strange for policy rates and market yields to move in opposite directions. He also pointed out that rates later went to zero.

Hedge funds have been running pair trades: going long AI memory while shorting bonds. Moon sees a recent shift in this positioning toward covering bond shorts and selling AI memory.

From early October, trading-room channels and some analysts spread the view that AI stocks are too expensive while US Treasury yields in the low 5% range are acceptable. Moon noted that foreign press reports suggest such talk began around October 3 to 4.

Moon advised following this flow for at least two months. His explanation is to re-establish positions once the flow stabilizes again.

The host saw many possible dominoes if AI falls. Moon answered that he agrees with the second premise but does not agree with the first premise that AI is driving growth.

If export growth keeps coming in positive, dollars received as export payments are converted into won, increasing dollar supply. In that case he saw persistent downward pressure on the exchange rate.

If the exchange rate falls, semiconductor price competitiveness weakens, which could raise concerns about export margin declines. However, since semiconductor exports are still positive, he said he looks toward a falling exchange rate within the larger macro trend.