1/ Ch-ch-ch-ch-changes (Turn and face the strange)... as futures, sit pinned @ an odd elevated morning perch awaiting Janet Yellen’s confirmation hearing & her call for the new admin to ‘act big’...this narrative has markets on high. But the truth is that it’s actually just Gary
2/x behind the curtain, pulling the usual levers. Until Vixperation on Wed, it‘ll be nearly impossible to break the IVol oversupply. This pinning of IVol was so strong on Fri that despite a peak to trough drop of nearly -2% in SPX, fixed strike straddle were down across the board
3/x & particularly decimated in the very front of the curve. IVol particularly in the 30 day range is showing dramatic signs of oversupply relative to the rest of the IVol surface, giving a nod to the Vix strip driving the compression. Even during windows of vanna weakness as we
4/x are in now, this oversupply phenomenon paired w/ a market decline & a slide to higher fixed strike IVols can still lead to a temporary ‘Dead Cat Bounce’ where residual Vanna/charm morning flows lead to brief AM market support. These supporting flows are generally just strong
5/x enough for a countertrend thrust &, unable to meaningfully impact more important macro flows & hence generally should be faded starting around 9-10am CST. That said Gary’ll likely see to it that there is no major technical break below 1 stdev in the 20 days, likely preventing
6/x a waterfall until Wed. This will coincide perfectly w/ the inauguration & this could serve as an ideal narrative for a decline. Watch for continued NDX weakness in the face of more bear steepening, retail call buying optimism, trolling of my account, & more of the shooting of
7/x generals as signs of coming weakness. Until Wed morning, calendar expansion should continue to be the name of the game,& given the coming wave if policy news that should begin to flow, I would expect more policy winners & losers to drive dispersion for the next 2 days w/ Gary
8/x still firmly in control of the index’s wheel of fortune.The broad macro assumption by investors that MOAR stimulus is great for markets will ultimately be a miscalculation.The shift will be great for the economy & cyclical earnings.However the continued march higher in yields
9/x will eventually lead to multiple contraction...& this market is all about liquidity & multiples at this juncture.The wall of worry is still fading, & the exuberance of a reopening economy is building, which increasingly means that this window of weakness will most likely come
10/x & go as just a correction in time. But we must be on alert still until 1/22. We will continue to trade this market tactically from the short side at our levels taking profits into a likely stair step correction or sideways chop. Watch for our 3718.25 level as well as our
11/11 1 stdev bollinger down of the 20 day. If we can‘t close below the later by 1/22 EOD, we will be forced to begin looking to position longer for a potential blow off euphoric reopening top in a future coming window in 1 or 2 months... Remember, it’s never EZ. Good Luck! 🍀

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More from @jam_croissant

21 Jan
1/x So, if you’ve been scratching your head about the recent countertrend DXY strength & wondering if it has legs,& it seems like the cyclical rotation hasn’t been trending as strong recently, & your Spidey-sense is telling you there’s a disturbance in the force, you’re not alone
2/x If you’re wondering what might cause this market to melt up & get us to a more Goldilocks scenario in the midterm w/out overheating, look no further than Ben & Randy’s spot on analysis here...It seems the reflation rotation, & all its trappings epsilontheory.com/uk-variant-sar…
3/x might be in for a hitting of the pause button. Unlike them I could see this ultimately being a bullish wall of worry to climb, likely after a brief initial pullback, as it could slowdown the climb in LT rates & help to alleviate ST inflation fears, ultimately pushing off the
Read 13 tweets
20 Jan
1/x The time is now...As I’ve said before, if there is 1 thing I stress it is that I don’t know everything. I understand several important inputs better than most. I understand well 50% of the daily flow equation, & can place reliable bands around another ~25%. This imperfect
2/x info still allows me to predict movement w/a high degree of accuracy. That said, when markets react counter to my data, that means factors outside if my viewfinder are having a very strong effect. So much so that the other 50-75% of flows that are known are being overwhelmed.
3/x When this is the case, the correct reaction to this deviation isn’t to stubbornly fight this new info, but to watch & track the divergence respectfully for confirmation of thrust. Broadly antithetical price strength @ that strength in these circumstances is meaningful & tells
Read 8 tweets
15 Jan
1/x So 6 hours until Vanna’s departure... though she hasn’t been working full-time the last couple of days, Gary’s been putting in some extra work to keep things together. But I have to say, this was a poorly planned vacation all along. We saw it coming. A 5 week OpEx, post the
2/x seasonally slow period for the wheel of fortune. All of the contestants are going to be demanding bigger payouts. The show has become so popular. The ratings are through the roof, they can’t disappoint! Gary’s been doing this for a while. So he’s not to be doubted, but it’s a
3/x lot for a 🦍 to hold together on his own.Especially given the new rotation away from popular old growth contestants that always made for such a great story. Small cap value just doesn’t seem to get the same ratings.There’s a new FCC administration & they’ll be cranking up the
Read 7 tweets
14 Jan
1/ Maybe, I need to say less things... Maybe I AM Gary, reflexively helping to pin markets through this otherwise structurally perilous window. 🤔 The market will be higher again tomorrow. $2 Trillion + Moar fiscal stimulus will be announced. The market will cheer this & rally.
2/ rates will likely march higher, the rotation will likely continue. If we are lucky the exuberance will reach a fever pitch and stretch, forcing capitulation. Tho I see Vanna starting to pack her bags for her Friday trip, Gary 🦍is still sitting around the house eating nuggets
3/ And the lower IVol goes, the harder it will be to move him from in front of the 🪟. All the ingredients are there, the window is open. The vanna thrusts will be gone on Fri AM, the sentiment, the retail and HF positioning, the move higher in rates, the shooting of generals,
Read 5 tweets
13 Jan
1/ Vanna’s a widow maker... waging war with her & Gary is exhausting... we were able to take a textbook short at 3803 and take a profit On half at 3771. We will look to add more in a similar way on tomorrow morning’s likely vanna rally again... looking for exuberance once again
2/ in that 9-10am CST window. The growing chorus of bulls emboldened by Vanna’s continued support the last few days gives me confidence that this opportunity will be there again. W/Gary & Vanna behind them the retail exuberance is rising to a fever pitch. This is exactly what we
3/ want to see. But what happens when their backup is gone?? Who’s going to buy this market at these increasingly higher levels this week. Better yet who’s going to buy it @ lower levels when they are forced to sell next week? Not Vanna. She’ll be @ the beach. It ain’t cool bein’
Read 10 tweets
12 Jan
1/x Alright, carry on... Not much has changed. Longer dated IVol was quite bid from the onset, & rightfully so yesterday. As the gamma has been paying for itself, while providing a tail. That said, IVol suppression is still very real. Gary will be hard to shake free from.But it’s
2/x never easy. the NDX weakness, the rising LT yields, the continued complacency, rise in LT implied Vols... all the signs were there yesterday. It almost always seems like all hope is lost at the end. It takes conviction & a willingness to step out of the party potentially
3/x a little early. The risk/reward is just not there right now. We’ll continue to play this market for stair steps down to sideways action, with calendar put spreads (1/15 to 2/5). Keep opportunistically taking shots to the downside @ our levels, knowing that vanna tho weaker
Read 5 tweets

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