1/x Well you can’t say I didn’t warn you... We’ve been eying that 3770.5 level and the 1/5-1/13 window for many weeks. To get it a day early, @ the lowest edge of the upper range, tells me that there’s understandable concern over the impending outcome of the runoff. As I’ve said
https://twitter.com/jam_croissant/status/1345997854242967556
2/x for months now, the market has severely underpriced both the probability and scale of importance of this event at a critical moment in our macrocyclical history. Today’s action was an attempt to pushback on Gary the 10k lb 🦍. & though it was a valiant effort and definitely
3/x served to reduce his stranglehold on the market, by the end of the day, the result was fairly predictable: failure at our 3770.5 level, followed by a drop to our 1 stdev down of the 20 day, tethering as expected from the continued oversupply ofIVol + building vanna flows,
4/x ultimately ending in mean reversion almost exactly back to our omnipresent 20 day. All points that I have clearly laid out ad nauseam...all roads lead to Rome. In the end, the early, ‘surprise attack’, though valiant, was not enough to loosen the giant’s grip. The pinning of
5/x index IVol, though loosened ever so slightly today, tells me the largest moves from the GA runoff will still likely INITIALLY come from factor rotation. As I've said before: When SPX IVol's pinned, it not only still allows for idiosyncratic risk & moves in constituents, but
6/x it FORCES extreme noncorrelation & rotation. As mentioned, closing above the 20 day was constructive. & importantly, until Gary’s grip is loosened sufficiently to create a technical break, building vanna/charm flows will be a force hard to trifle w/between now & 1/11...
7/x We were able to buy in growth gamma on the open this AM & BTD midday. This was too easy and felt like a warning shot. On a dead cat bounce, the next time down between 1/6-1/15 will likely not be as kind...Ride the vanna flows every day from 1:00pm-9am, turning flat to short
8/x from 9am-1pm or on a move below 1 std dev down of the 20 day. The party is over, but the last few hours of reindeer games are still being played out in the parking lot. Don’t confuse them for anything more than a little short term fun. The real $ is to be made when the ☀️
9/9 comes up on 1/11 & there are no longer supporting vanna flows, or a technical break allows the market to break free early from Gary the 🦍 . Good Luck! 🍀
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