1/x OUR ANTICIPATED PFIZER NEWS CAME SOON POST ELECTION, AS PREDICTED ... But, as is often the case, positive prospective news can serve the market better as a rumor then as actual news, as it now provides less potential future support from hopeful expectations. Despite a weak
2/x close, the market was still able to barely overtake our important level in the 1.5 st dev up of 20 day of SPX... WHERE, AS OFTEN HAPPENS W/ IMPORTANT TECH LEVELS, CLOSED DIRECTLY ABOVE IT...Today’s market action, though superficially constructive, had quite a # of concerning
3/x underlying factors beneath the surface. The dramatic NDX weakness, in the face of improving economic fundamentals is concerning, in that it continues to clearly signal that the duration trade will not likely respond well to a strong economic recovery paired w/fiscal policy
4/x & higher LT rates...This paired w/the continued overreach of retail call buying is flashing a potential warning sign, as value does not seem to be strong enough to support this market at these multiples on its own & positioning seems to be overextended...Early vol compression
5/x was unwound late w/ the massive RVol & NDX weakness & seems to be attempting to try & unpin the market. This will not be easy, as the SPX has been well oversupplied, but if it succeeds, we should know tomorrow morning as it overwhelms coming Vanna flows. This AM price action
6/x will be a very important tell & should be watched very closely & respected...if IVol compression can be maintained early, similar to Friday, it could give way to a slow & much needed correction in time. Given the cross currents, we are still watching for clear confirmation to
7/x consider long delta entry...Time is still on the side of the bulls, as OpEx cycle driven Ivol compression & Vanna/Charm flows into 11/18th VIX expiry & improving seasonality, as well as the potential resolution of election uncertainty, could provide fuel to significantly
8/x improving seasonality around Thanksgiving, X-Mas & the Jan effect...The market has come too far/too fast & ST risks of mean reversion continue to present themselves at these levels. Be careful, particularly in the face of continued retail exuberance. I still don’t encourage
9/9 chasing this market, given the poor undercurrents. Patience is a virtue here... Do not jump in w/out a healthy correction in price or time from these levels &, among other things, vol compression, healthier relative NDX performance & equity p/c normalization...Good Luck!!!🍀
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