Thread by @jam_croissant

1/x The election is here. I’m not going to belabor my previous points(which u can read below),but I do have some important nuances to add based on today’s action... Given the amount of vanna flows we clearly saw today, w/ the $20 move down in SPX straddles across the board, the

https://twitter.com/jam_croissant/status/1323147835517390848

2/x price action was underwhelming. It’s important to keep in mind, that these markets are still technically broken, & despite these very positive flows, which will continue this week, if these markets can’t manage to repair their technical damage post election w/ a move above

3/ the 20 day, as I’ve mentioned before, this’d be an important sign of underlying weakness. A driving point of concern today was obviously the overwhelming NDX weakness. Despite my mention of 3/4 of scenarios being positive for fiscal stim & other bullish flows on the horizon

4/x it is important not to be dogmatic...Though a blue wave would be great for economy & stimulus, it could force a continued rotation from growth to value, as I’ve mentioned, that could drag the indices down. This said, even if a down move was to materialize, I don’t foresee it

5/x being a fast move. Both due to positive vanna flows & short dated hedged positioning, a down move w/a clean result this week’d likely be met w/ significant vol compression & calendar expansion into 11/18 (Vix exp)...None of this is to say that a quick rally has been taken off

6/x the table.Quite the contrary. W/ a quick & decisive resolution to the election, significant vol compression across the curve, like today, & a vanna driven move by 11/18 above the 20 day, around 3400-3415, a melt up to new highs would be likely...But technical weakness must be

7/x Overcome & the market must show meaningful strength upon resolution of vanna flows or risk capitulation... the best bet, as I have mentioned, continues to be to bet on the continued compression of Ivols. Backwardation, though less steep, continues to be meaningful enough that

8/x Dealers should continue to decay longer IVol in the front of the curve. This paired w/ over hedging in ViX calls (& puts) seems to point to a smaller likelihood of tail events. A move down, in particular, could ironically lead to even greater compression of fixed strike vols

9/x than a rally, as the market would slide to some very elevated vols post event...Watch the NDX, the 1std dev down on 20 day & then 20 day itself on close. Watch supports & price action after morning & EOD vanna flows for weakness despite them. Vanna support & Vol compression

10/10 are both likely to occur, but whether they will be enough to support this technically broken market facing severe rotation is still uncertain... Good luck!!!🍀 🍀 🍀