1/xWhat we know: -All If this has been very predictable we flowed versus 3200, all the sentiment and flow indicators turned bearish and with the seasonal and expiration calendar turning all that was left were poor technicals -with Vol tidily compressed and a move last week above
https://twitter.com/jam_croissant/status/1310448842626736129
2/x the 20 day, it was just a matter of time before vanna, trend following,Vol targeting, & risk parity flows took the baton & pushed us to this point -2nd to last week of monthly OpEx is strongest week of the cycle -given Fri concerns, the size of the rally was a bit of catch up
3/x on what are predictable Mon vanna flows. -Even so, the move has been relatively big in a short period of time, especially given still relatively weak seasonality, weak NDX leadership, & still not fully repaired technicals... What does this all mean: the 200 pt SPX rally has
4/x Come too far/too fast in a short period of time & faces important resistance directly overhead between 3427-3436.75 - at the same time, this is the strongest period for vanna flows and this market should continue to see considerable buying support -Implied Vol has compressed
5/x even more than prior in the front of the curve -and buying pressure in the back of the curve has abated with the notable absence of the NDX whale, who may be done with their stock replacement. —-All If this points firmly to continued Vol compression for the next week,
6/x and likely a pinned market with a narrowing range until 10/12-14. -Watch out for August’s market up, vol up dynamic. IF WE BEGIN TO SEE THIS DYNAMIC AGAIN, THIS WILL BE A SIGN TO SELL. Until then use the 20 day as a trailing stop on a closing basis, watch the NDX weakness for
7/7 signs of potential acceleration & watch the market’s reaction to the 2 std dev up on the 20 day for clues. Historically this is a good time to digest short dated IVols. Good luck 🍀
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