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
4/x Fed & the bond vigilantes for several more quarters than initially planned... Although this doesn’t change our view on the LT trajectory of the rotation we have been riding, I think it is smart to respect the effect that this new Covid variant could very well have here at
5/x this juncture, especially given the incredibly slow pace of vaccinations. To be clear, I still strongly believe the rotation we have seen since Sep is a prelude of much more to come, but given how central it has become to the narrative lately and the risks of a MUCH slower
6/x reopening from the slow vaccine rollout + highly contagious new variant, I would take profits in the rotation & look for more dollar gains in the next month or 2..This paired w/ news today that Biden’s stimulus likely doesn’t have the votes to get the scale that he’s pushing
7/x for w/out some accompanying tax cuts earlier than hoped, only exacerbates the likely pause in the cyclical value narrative. As for the market, in the short term it’s priced for perfection. w/the accelerated timeline for a tax bill, stronger dollar, stretched positioning,
8/x seasonal weakness, & LT fixed strike Ivol rising as it slides to too low Ivol, all the signs are there for a short term digestion in price & time.That said, price is truth.@ the technical strength should be enough to support the market until Vanna’s return to the W.of Fortune
9/x late next week. Until price tells us there’s a reason to break price, it’s dangerous to short a market going bottom left to top right...We took a shot in a very defined🪟where most of the ingredients pointed to a potential risk after a long run. The strength we’ve seen, given
10/x the🪟of weakness, has been very telling.The🪟’s closing. We know better than to marry ourselves to a countertrend strategy outside of this 🪟. This is nothing more than a hope strategy. Until we see a technical break of 1 stdev ⬇️ of the 20 day, don’t fight the trend.
11/11 look to buy a likely coming correction in time and/or price in the days to come. Good Luck!🍀
*TAX INCREASES (not cuts). Edit button plz @jack
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