1/x Things change quickly around here...Just 2 weeks ago SPX traded 260 pts lower amidst HF deleveraging, while seasoned PM’s clamored about how it was likely the end of the bull market... Now, as the market explodes to our long expected ***objective of 3952, it seems superhuman,
https://twitter.com/jam_croissant/status/1360113412039208960
2/x virtually unstoppable. Such is the power of the emotional center of the 🧠, the amygdala. The truth is little’s changed. We remain in an uptrend from bottom left to top right, & Gary’s very much still in control. Yes, there are innumerable reasons for secular concern after a
3/x 23% SPX rally since Sep & nearly 80% rally off the Mar bottom. It’s still a seasonally weak period, w/ mind-bending complacency towards dramatic policy uncertainty under a new admin, which should be on display @ Biden’s SOTU on 2/23. Vanna has less & less power these days, w/
4/x a VIX floor around 20. NTM her & Sloth will be heading on a charming imminent vacation to the🏖this Wed for 1.5 weeks. The market’s now overbought @ over 1.5 stdev above the 20 day & Sentiment (low short interest/low Put Call ratios) remains near ATH’s. NTM both A lack
5/x of breadth & underlying weakness from NDX market leadership, like TSLA, where skew & bearish flows have showed signs of a potential crack in the edifice. W/ index skew @ the 95th+%, fragility on the tails increasingly dramatic, also displayed in historic VVIX/VIX extremes.
6/x All of this while correlation has begun to blink yellow w/ a rise from a historically low floor. So, despite the calm façade, there's reason for concern, if/when Gary were to lose his grip w/ a move below the 1 stdev down of 20 day for 2 days...Despite all of this though only
7/x 1 thing currently truly matters right now, & that’s macro FLOWS...Which should come to a head in several important ways in the months to come: 1)new $1400 stimy checks will hit retail again in early Mar 2)Taxes will come due in Apr while LTGains from Mar buying should come to
8/x term @ a similar time. Lastly 3) the economy should begin to reopen in May/June, diverting $ from markets back into the real economy, & pushing yields up, also diverting $ over to bonds via risk... So, far now, all of this points me to a likely 1.5 week period of correction
9/x in time/ price starting mid to late this week, while Vanna is away, that if unable to break our important technical support by 2/26, should be bought into for another retail driven meme stimy shopping spread & reopening exuberance.That said coming in 3/15-17 we could see the
10/x potential for an inflation driven taper-tantrum that could be exacerbated by both tax selling to realize LT gains as well as for funding taxes due. In the meantime, it is time to play for a bit of mean reversion starting tomorrow into Wed morn. Watch carefully for signs of
11/x fixed strike Vol unpinning Gary, tomorrow morning into the rally and into Wednesday Vixperation. The higher we go from here, the next 4 days, the more likely we are to get a bigger pop in fixed strike Ivol & a retracement in the days to come. Watch for retail overreach in
11/x the form of low put/call equity & continued NDX/Tesla weakness... Ultimately, as is usually the case, time is on the side of the bulls... But the🪟is officially open in the AM, & it is time for cautions, especially if someone can manage to take Gary 🦍’s 🍌’s away...time to
12/x monetize the short Vol, long deltas & dispersion that we have been carrying since 3700 in favor of tactical hedged long index calls, & downside convexity, funded w/ local Vol. Long Index RR swaps also make sense, as does absurdly cheap 2/26 index Vol for the SOTU
13/13 and long TSLA collars for convexity for a brief🪟. Good luck!!! 🍀 🍀 🍀
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