1/x Here we are on 11/18... Vanna is up late packing her bags for her trip. As stated for over a week now, UNPINNING THIS MARKET UNTIL 11/18 MORNING was not in the cards as near-term SPX was well oversupplied and vanna/charm flows have been simply too strong.Vanna will be all but
2/x gone by tomorrow afternoon and Vol oversupply should be gone by 11/25.... My base case is that a buyable dip in time and/or price is coming. & IMO short calls continues to be the play until 11/25. Watch for the last of the AM vanna flows to try and counteract some of these
3/x overseas negative flows in the AM. That will likely be a short sometime between the open & midday. From there expect more stair steps down w/ Vol, just as forecasted today. The action Thursday should be similar. Watch this Fri very carefully, a sell off of any import should
4/x accelerate by 1pm CST going into the weekend, if there is any there ->there... If the market is well under control by Monday morning, it would make sense to start eying dips to buy tactically based on other factors in the days to come. As I have belabored in previous posts,
5/x seasonality is real. A shortened Thanksgiving week next week will make it hard for negative flows to take hold. Potential energy in the form of increased election certainty will continued to play a positive role as well, as longer term vols should continued to decline
6/x releasing their long-embedded vanna flows into the EOY. Given these Vol flows paired w/GS estimates of +$37B worth of systematic equity flows per week in an up tape, I continue to suspect a coming time/price ‘correction’ will probably be met w/ market down/sideways/Vol down.
7/x Possibly leading to a buyable dip in time/price by 11/27. Be careful not to buy into the dip too soon, as there are no guarantees it will be buyable, given the abundance of unsettled political & Covid related concerns...Let the calendar be your guide & the 20 day on close be
8/x your rising stop, if/when the correction comes. Watch skew & vol reactions as well as p/c equity & sentiment indicators as clues to timing. We’ll be playing tactically from the short side after the morning print from our levels.
9/x 1/15 Vol on back continues to be cheap & we continue to own downside calendar spreads, OEV neutral for the coming correction in time/price... Good Luck!🍀

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More from @jam_croissant

19 Nov
1/x The playbook remains the same. Fixed strike straddles were down $10-$4 across the board today, into a very weak tape, as predicted. Vanna support is gone...but the IVol compression remains. The script should continue, as expected, w/ morning stability and RTH digestion &
2/x stair steps down w/continued IVol down through the Fri morning AM OpEx print. As mentioned, be attentive to this Fri post OpEx price action. A sell off of any import should accelerate by 1pm-2pm CST going into the weekend, if there is any there ->there...If the market is well
3/x under control by Mon morning, it would make sense to start eying dips to buy tactically based on other factors between 11/25-11/27. Don’t be a hero, trying to buy into the dip too soon, as there are no guarantees it’ll be buyable, given the abundance of unsettled political &
Read 5 tweets
16 Nov
1/x It took an extra day & an extra whipsaw to lose the weak longs, but as I reiterated yesterday, & as you saw again at EOD Fri + now in ETH, these massive Charm/Vanna flows are hard to fight... SO, here is the rally we have continuously called for all month, leading into 11/16
2/x in the end... as stated previously, UNPINNING THIS MARKET UNTIL 11/18 MORNING, WILL NOT BE EASY, as near-term SPX continues to be well oversupplied...As expected, increased election certainty has continued to play a positive role as well, as longer term vols have continued to
3/x decline releasing their long-embedded potential energy in the form of even more vanna flows. These Vol flows paired with 1) GS estimates of +$37B worth of systematic equity flows in an up tape over the next week. 2) as mentioned, the stabilization of the Growth complex W-Fri
Read 12 tweets
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
Read 10 tweets
12 Nov
1/x Short & Sweet tonight: Today’s market action was quite constructive....Our short near dated Ivol & SCALPING FOR MEAN REVERSION IN EITHER DIRECTION WORKED PERFECTLY YESTERDAY.... & WE HAVE NOW BOUGHT INTO THIS MUCH AWAITED DIP OVERNIGHT @ our published level of 3539.75.
2/x We not only got the continued correction in time & massive vol compression we called for, But we also finally got some much needed repair of the nasty rotation beneath the surface, which has kept us cautious...That paired with the dramatic reduction in retail call buying &
3/x substitution of fearful retail put buying for the 1st time in a while speaks to improved sentiment factors... giving us the green light we have waited for. As I reiterated yesterday, UNPINNING THIS MARKET WILL NOT BE EASY, as the SPX has been well oversupplied...
Read 7 tweets
11 Nov
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
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
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,
Read 5 tweets
11 Nov
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
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,
Read 8 tweets

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