1/x Despite an overwhelming number of fundamental reasons to be 🐻’ish, the 1-2 punch 🥊of 1)a well FED Gary & 2) an increasingly more involved Charm🦥, should continue to support the market until late 3/31st when Vanna should return, fresh from vacay & throwing haymakers...So,
2/x despite all the drama & headlines, stay the course, & expect more digestion... To be clear, normally, given +seasonality, the reopening & the technical strength of the last week, we would normally expect significantly higher prices, but 1)momentum has been waning 2)the NDX
3/x leadership hasn’t been able to regain any semblance of strength 3) the 🐻 steepening of the yield curve continues to scream, now having reached the > the 2/10 spread has seen since 6/2015 4) the DXY is 🆙 1.2% in a week 5) we are staring $136 bill in neg equity flows from
4/x balanced mutual funds for EOQ 6) There has been little to no retail call buying response to the new stimmy tendies due to the reopening (as predicted) 7)NTM, potential contagion effects from incredibly poor liquidity put on display amidst a ‘calm market’ in the $20 bill blow
5/x up d’jour of everyone’s fave Asian 🐯cub Archegos Capital... such is the power of Gary 🦍& his friends👸,🦥...In fact, as BAML has noted, “traditional volatility metrics woefully understate today's still high vol among US stocks.Strikingly, so far in ‘21, the market cap being
6/x gained or lost in extreme swings among S&P 500 stocks is nearly on par w/ that of the 1st half of ‘20 (during the Covid crash), despite stock Ivol over 40% lower now. Small caps also keep setting records with 80% more 10-sigma upside shocks this year than ever before”. This
7/x speaks to the underlying fragility, being tenuously held together by 1 💪🏼 🦍. As such, until at least 4/5 (&likely 4/12), Dispersion should continue to be the trade, particularly SPX vs EM, growth, small cap, energy, infrastructure, commodity & high DCF names. Calendar call
8/x spreads also continue to be a strong play as we should continue to🪓& grind w/ an 👁 on a likely new game of🐔@ 1.5 std dev up BB of the 20 day imminent...as mentioned prior to my vacay, the distribution of this market continues to be right biased w/a fat left tail thru 4/12.
9/x As such, we continue to hold cheap convexity in the form of broken butterflies in 4/23 in the NdX, where skew is cheap, as well as ViX calls, vs short SPX skew. Watch for more news on a bigger than expected infrastructure bill that’s to be pushed through using reconciliation,
10/x to begin to hit the wires & drive narratives over the long weekend, while a better than expected NFP could also serve to grease Gary’s wheels w/ a potential spike in rates, while the markets are closed on Good Friday... Good Luck!!!🍀🍀🍀
END
• • •
Missing some Tweet in this thread? You can try to
force a refresh
