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Cem Karsan

@jam_croissant

13 Nov

1/x When you know you can measure certain critical flows very well, but not all of them, & you begin to see that your flows, tho sizable, aren’t moving the market to the extent that they should, what does that tell you? Some flows you can’t see, are counteracting your known flows

2/x (maybe stress somewhere in portfolios ?, maybe known information out there about coming plans? etc)... Pretty simple, right? Just as good information is predictive, the absence of the expected result in the presence of predictive informations is often just as illuminating...

3/x That’s what happened today. By all accounts, based on structural flows, today should have been a strong day. It became evident around 10am CST today that the expected strength that we got, however, was not up to par and was being overwhelmed by other flows...so Instead of

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Cem Karsan

@jam_croissant

11 Nov

https://twitter.com/stevekavdc/status/1326534987991015435

1/x So why did this extreme rotation happen the last 2 days? The benefits to economic growth for value stocks is obvious.BUT WHY A ROTATION & NOT A BROAD RALLY? I’ve put out a lot of commentary about how the increases in econ growth expectations that the vaccine & fiscal stimulus

https://twitter.com/stevekavdc/status/1326534987991015435

2/x cause are bad for the duration trade & multiples. I’ve been pounding the table on this for quite some time. But it’s important to note that these fundamental threats to growth still come w/ a lot of potential caveats, are far from certain given the likely political landscape

@choffstein

3/x @ this juncture, & will likely play out over years/decades, not days or months...SO WHY?! The answer is simple. As I’ve explained before, & I worked w/ @choffstein to help him enumerate in his fabulous piece ‘liquidity cascades,’ when index IVol is compressed, as it is now,

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Cem Karsan

@jam_croissant

11 Nov

https://twitter.com/jam_croissant/status/1326020701132902401

1/xToday’s market action was generally constructive as WE GOT THE CORRECTION IN TIME WE PREDICTED... That said, we continued to have a nasty rotation beneath the surface, which has kept us cautious. The dramatic NDX weakness, in the face of improving economic fundamentals is

https://twitter.com/jam_croissant/status/1326020701132902401

2/x concerning in that it continues to signal that the duration trade will not likely respond well to a strong economic recovery paired w/fiscal policy & higher LT rates, & it does not appear that value is strong enough to support this market given the multiples at play & size of

3/x the growth complex. On the bright side, fear is creeping back intro the market and retail call buying was substituted for considerably more put buying for the 1st time in a while...Maybe most importantly though was the continued SPX vol compression. As I reiterated yesterday,

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Cem Karsan

@jam_croissant

10 Nov

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

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Cem Karsan

@jam_croissant

9 Nov

1/x As noted on Thurs... 11/9 dealer positioning was very short & Vanna flows would clearly be supportive into Mon morning...That paired with more Vanna flows, on the back of greater election certainty are not a surprise here... Fri’s market action was very constructive. After

2/x Thurs when IVol moved significantly higher in the back of the curve, vol compression reappeared across the curve. NDX weakness on Thurs & Fri morning notably reversed in Fri afternoon & stabilized. The last missing positive sign, as I‘ve mentioned, was an underlying price

3/x thrust in the face of an approaching technical level in the 1.5 st dev up of 20 day of SPX. We seem to be receiving that overnight now... As tweeted, we initiated short Vol Fri late morning, upon Vol compression & NDX reversal, given these prospective coming positive vanna

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Cem Karsan

@jam_croissant

6 Nov

1/x The outlook was indeed promising yesterday... As posted, we were able to monetize our long deltas & short Vega this morning at the 3508.5 level. Good thing, b/c, as highlighted midday, fives strike IVols bottomed & moved significantly higher in the back of the curve.

2/x This kind of move into a rally can serve to unpin the market, if it continues, & shows concern on the part of institutions, retail call buying exuberance, & is a sign of increasingly short dealer gamma positioning. Moreover, we had several other ST warning signs today.

3/x NDX weakness, low P/C equity reading all day, & maybe most importantly, a very poor price thrust to an approaching technical level in the 1.5 st dev up of 20 day of SPX. This weakness is particularly notable given the dealer gamma squeeze that should have helped the market

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