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๐Ÿปโ™‰๏ธโ†—๏ธโ†˜๏ธโ†”๏ธโš ๏ธ๐Ÿšฉ๐Ÿ”บ๐Ÿ”ป๐Ÿงฎ ๐Ÿ’ฐ

1/7 ๐Ÿงต

Global Macro Review 08/14/2022

A big decline in $CPI to +8.5% y/y, โž• the July services #PMI โ†—๏ธ โž• #NFP โ†—๏ธ, kept the ๐Ÿ”ฅ burning on risk assets - enough to lure the โ™‰๏ธ

Is this a new โ™‰๏ธ market or the end of the ๐Ÿป rally?

Letโ€™s dig into the ๐Ÿงฎ!

Equity volatility โ†˜๏ธ across market and ๐Ÿป Trend (T)

$VX 19.53 -1.62 bps
$VXN 25.18 -1.95 bps
$RVX 24.23 -1.07 bps
$VSTOXX 21.21 -1.64 bps
$VXEEM 19.45 -2.41 bps

Chart: $VXEEM lending support to $EEM ๐Ÿ†• โ™‰๏ธ

US equity indices ๐Ÿš€

$SPX +3.25% (w) +6.35% (T) ๐Ÿ†• โ™‰๏ธ
$COMPQ +3.1% (w) +10.55% (T)
$IWM +5.0% (w) +12.5% (T)

Chart: $IWM - small caps have retraced nearly 50% of the 6-mo decline
Read 16 tweets
The stock market is making me nervous about a deeper pullback. It is trading over a percent below the Lower Boundary of its Probable Range, indicating it wants to at least break down to neutral from the perspective of our Volatility-Adjusted Momentum Signal (VAMS).

That said, the last time we saw such a deep downside deviation w/r/t the S&P 500โ€™s Probable Range was on 5/12/21. At the risk of anchoring on an n-size of 1, investors can breathe a sigh of relief b/c that was not a sell signal on either a one-week or one-month forward basis.

I watch Micro Caps $IWC and Frontier Markets $FM as ancillary signals of broader "risk off" conditions -- which our primary risk tools are disconfirming. Both are bearish VAMS, but neither has broken to new lows. That is a good thing for broader risk appetite until it isnโ€™t.

Read 4 tweets
Good morning! Options still slightly overpriced despite the overnight rally. There was a slight vol crunch up near the close yesterday, so while the VIX/SPX relationship is still favoring more upside, it will be limited.
I gave a target of 4400 a couple of days ago, and that seems easily attainable, might reach 4420. This rally will likely end by early next week. A lot of puts were purchased this month, and the gamma unwind will be rocky. Also, MMs are still component gamma positive until 4400.
As a side note, McConnell did us a favor. By kicking the can down the road, he gave a template of exactly what the market looks like with the threat of debt ceiling issues. so in late Nov, we can use early Oct as the template for a trade. Thanks Mitch!
Read 6 tweets

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