Michael Burry Says "Pain Trade Continues to Be Rates Down, Nasdaq Down" as He Eyes a "Red October" Call

Michael Burry says that while the consensus view holds that lower yields are bullish for stocks, "the pain trade continues to be rates down, Nasdaq down." On Oct. 15, the 10-year Treasury yield dropped more than 10 basis points to roughly 5%, yet the Nasdaq opened 1.34% lower as chip stocks kept sliding.
Burry says the next test is whether the selling spreads to the Magnificent Seven, which would add conviction to his call for a "Red October." He believes the market is within "zero to nine months" of a significant top.
Nearly all of his short exposure now sits in put options on the Nasdaq-100 and the VanEck Semiconductor ETF ($SMH), both roughly 20% out of the money. The Nasdaq-100 puts expire in April 2027 and the SMH puts expire in June 2027. He also still holds puts on Oracle ($ORCL), Palantir ($PLTR), MetLife ($MET), and Caterpillar ($CAT).
On Oct. 14, the S&P 500 fell 1.11% and the Nasdaq dropped 1.88%, ending the S&P 500's longest run without a 1% down day since 2020. Fellow "Big Short" investor Steve Eisman has called Burry's argument about AI chip depreciation "too academic."