Market guidance. Hope the open gap taught some newbies shitcos chasers a lesson. The bottom does not seem in for many reasons: a- no significant move in spot vol b- front months (1-2) TS still too steep c- bulls were too quick to BTFD. So don’t chase to the upside
That said, I don’t expect any imminent market breakdown here. For all the structural weaknesses that I have been highlighting, vol supply is still powerful, skew is still very expensive, no marked pick-up in correlations and retail still too loaded on variance products
Index gamma is benign all the way down to 3750 which is the major danger zone in the $SPX. This is where gamma turns negative and where you can see accelerated selling down to 3500. I don’t expect this to happen for reasons listed below, but it could.
Real rates and TP both had very sharp moves of late and convexity hedging seemed to have been done for now. I expect some respite on rates vol and continued $ weakness to offer some tailwinds. Also, Macro flows are still favorable to risk although tailing off slowly.
Bottom line: use any upcoming weakness (especially if there is spot vol capitulation and prevailing bearishness) to close shorts. Use next leg up which could well take out recent ATH to clean the house. Don’t carry dead bodies. $ down, rates vol calmer but will pick-up
This bull market is ending. Best way to describe it is to paraphrase Gramsci : « the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear ». These violent moves will be the norm. And will trap bulls and bears alike.
$ , continued risk-favorable macro flows and without a doubt some desperate PR band-aids by the likes of Elon and Cathie will turn this boat. Use, what is likely to be the last respite, as market expectations of a Fed rate hike gets gradually brought fwd, to SIS.

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More from @alexharfouche1

19 Feb
Risk is currently many sigmas above what it was at any other point since 09 and in some cases at ATH. Some aspects like extreme leverage, positioning, valuations, bullish skew, etc...are covered ad nauseam. I would like to focus on some less appreciated aspects of risk.
Illiquidity risk is nearing peaks here. Micro-cap outperformance is at extremes. Here is the 6m ROC of IWC/SPY. This drive towards illiquidity is reflexive, as the flows compress the bid-ask spreads and suppresses the perception of risk.
Same is happening in credit. Ambihud price impact measures and bid-ask spreads in IG have improved to the point where illiquid names have been outperforming liquid ones since Nov 20. Clearly the erosion of CRP(75% of CCC names are trading > par) is driving this push.
Read 5 tweets
18 Feb
Markets are still on razor’s edge here. But it is encouraging that volatility have migrated mostly towards FX. The likely scenario here is for the $ to absorb most of the ripple effects of the rates sell-off by giving a last tailwind to equities and EM portfolio flows
This could minimize volatility beyond OpEx (large expiration = will whipsaw). The market has been able to absorb not one, but two major unwinds in the last weeks. The L/S eq unwind following $GME and the rates vol shock. Yet, underneath the surface cracks are multiplying.
Now that rates have risen quickly, everyone is waking up to the fact that higher rates come with higher rates vol and spreads vol partly because of the increased convexity hedging needs. Global debt levels are nothing like 2013 (a good 70 $ tn. above)
Read 7 tweets
17 Feb
The divergence between eq and rates vol widened significantly. The 3m10Y swaption vol went through 70 bps yesterday as wrong-footed positioning triggered option-driven selling. Vol is becoming sticky in rates, and that’s worrying. The 1.3% level will trigger more convexity
Related hedging from MBS investors. So we are at a v significant escalation threshold, which explains why the Fed started talking the long end down. 2 other moves lead me to believe that we might have a short-term rally/respite in rates: a- vol seem to have migrated to FX
With the sharp move in the $, probably reflecting some yet to be accounted for flows into UST given the super high yield pick-up for Europeans and Jap. b- breakevens spread to inflation swaps has gone through an important level => breakevens likely to pause/relax a bit
Read 5 tweets
12 Feb
#irrationalebullience If you want to understand the nature of this asset bubble and the epic capital mis-allocation at it’s heart, look no further than rates. CB’s only tool to push an uber-levered financial system that is highly interconnected through derivatives
away from it’s natural convergence path towards collapse is to create opposing forces to push it towards divergence. Meaning: force, through financial repression, market participants to rely on price continuation, in a way that makes it self-fulfilling.
The tool used is rates as it is the basis off of which all other financial assets are priced. Today any buyer of $UST across the curve up to 30Y is guaranteed a loss given reals are negative throughout. So the only hope of escaping this GUARANTEED loss
Read 12 tweets
11 Feb
$TSLA am not an expert on shorting stocks, just your average Joe with a Casio calculator. But for the 1st time ever, the time looks ripe for a short. Let me elaborate. To start, if you read my previous post, it established a troubling fact pattern that is a good premise. (1/N)
Let’s clear one basic thing first. The issue that I raised in my previous thread would be unnoticeable if it wasn’t coming on the back of one of the most grossly overvalued stocks EVER. Let the numbers speak for themselves. (2/N)
If I was to highlight one number everyone should be focusing on, it’s FY21 EV/Sales against street’s uber-bullish 19-22 CAGR est. That multiple was in the high teens at 900, in-line with the CAGR regression for tech, auto and clean energy. Except, margin est. are going ⬇️ (3/N)
Read 22 tweets
9 Feb
$TSLA I am no equity analyst and do not have an in-depth knowledge of $TSLA nor do I really care to. I am applying non-expert basic common sense here to show that, while corporate frauds and scandals usually come to light after a market mania blows off
The signs are now out in the open and available for anyone with a pencil.
This is a public company, that manufactures cars whose marketing is aimed at ecologically conscious consumers. It’s a market disruptor with a viability function depending on a technological edge.
Also, it’s a company that made all it’s Op profits in H1 20 selling carbon emission credits. Finally, weird to have to specify this, but it does have a board of directors.

Tesla disclosed, after the fact, having shoved $ 1,5 bn, it’s yearly R&D budget, in $BTC.
Read 6 tweets

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