Thread by @jam_croissant

1/x Today price action was important. The price strength in the face of numerous attempts to break down & uncertainty surrounding stimulus talks was impressive. It was also notable in its inability to not even reach the 20 day. This is the kind of price strength you’d expect from

https://twitter.com/jam_croissant/status/1318404779211739136

2/x a market intent on a bullish thrust. That said, election vol was notably bid today despite the rally & the NDX was relatively weak, which should continue to give us a bit of pause. Maybe most importantly today though was quite simply the passage of time.We are 1 day closer to

3/x reinforcements in the form of more positive flows starting next week. Tomorrow is VIX expiry & importantly the deadline for a stimulus deal. How the market responds to these events is critical. As I expressed in a separate thread, I would be surprised to see a stimulus deal,

4/x but, as I‘ve also expressed, this is largely a red herring for the majority of outcomes.I believe we could see a negative knee jerk on this ‘negative’ news tomorrow or next day. If the market reacts well around the 20 day after, it could possibly represent a short term bottom

5/x There‘s still time for bears to take control, but I’ve been clear, that this must happen by next Mon 10/26. technicals & seasonality are improving, IVol is compressed in the front of the curve providing leverage & a tail wind for Vol targeting, trend follow, risk parity flows

6/x positive EOM/BOM flows are around the corner & 10/26 positioning is favorable for some positive SPX flows before. Following the election, as discussed in recent interviews, there are cheap election Vol plays available to dealers for the weeks following the election-thru 11/27

7/x that should provide gamma, though continuing to normalize, there‘s still a post-election hump that should provide significant potential energy for a thrust higher backed by vanna flows upon resolution of the election. This is an underlying cause of the broadly misunderstood

8/x ‘wall of worry’ effect. Feared events rarely materialize as real events, regardless of the outcome, due to these factors. These flows, paired with an EOY performance chase, should take us to the most positive mth of the year 12/15-1/15, where Santa Clause & the ‘Jan effect’

9/x could begin to forward to a coming vaccine & economic reopening. The 20 day is moving up quickly towards us & must be used as a stop on a closing basis. I would still be cautious buying into this market until the stimulus news is out & the market has show strength. If this

10/x news is ‘negative’ like I suspect it‘ll be, the reaction of IVols & skews‘ll be important. If they maintain calm & we get through Thurs without a close below 20 day, that‘d be very constructive. Ideally we get some fear+ a reversal, in this Wed-Fri window. Good luck!🍀

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