1/x Here we are @ 4/12. The rally to ATH has transpired as predicted & the VIX has tumbled to 13 month lows. The🪟of weakness has opened & this is where things start to get weird...it’s NEVER straightforward, & imagining how this market will manage to tumble through the🪟begins
2/x to become fairly hard to pinpoint. The truth is, that despite Vanna’s👸part time sched this week & charm’s🦥fading strength as the week goes on, Gary’s still very much in control until the🍌’s get taken away. Any rally to our 4140 *** objective should begin the process
3/x of loosening his grip...& any rally above 4140 toward a 420 spy before 4/20 should only serve to create greater potential energy for a correction in the month to come. Skew in the indices has been shockingly soft given how low IVol has become, NTM particularly in the front of
4/x the curve, as term structure has also steepened so dramatically, that it has left the potential for a wild rumpus to begin w/OTM puts in the front priced at absurdly low Ivols....A sizable buyer of margin puts at this juncture could be all it takes to set off a repricing that
5/x could ripple quickly through the Vol complex starting in the 2.5 weeks to come. This🪟happens to line up w/a 5 week OpEx cycle, which makes it all the more vulnerable, especially given what seems to be a dangerous liquidity period in what is the Treasury’s greatest monthly
6/x issuance ever($370 mil)..amidst no further SLR support & it’s clearly not a coincidence that our head zookeeper Powell took 60 min out of his Sun to make sure Gary was well FED come Mon morning. Add to this a critical CPI number Tues morn & likely🔥bank earnings coming Wed,
7/x driven by a🔥housing market, historic ISM strength above 64, & a steepening yield curve, & it all adds up to the potential for a disturbance in the force... multiple contraction via rates is on le menu. It’s not a Q of if, but when @ this point...& ultimately the stars seem
8/x to be aligning for sooner rather than later, as retail call demand also seems to be softening amidst an economic reopening, tax sails begin to enter LT realized gain status & investors begin the process of making estimated calculations & payments for taxes in the month
9/x to come... Watch Rates like a 🦅. Watch Fixed strike Ivol on the rally. Watch IWM & NDX for underperformance. That’s is where we’ll be proactively adding convex hedges opportunistically to our Tesla & Arkk bets to take advantage of liquidity on the tail when the opportunity
10/x arises. All of this said, as mentioned on Fri, remember it’s never an easy ride. we’re likely to get some more mowing of the 🌷’s & signs of accelerated forced call squeezes across the space before it’s all said & done. The RSI’s are blinking 🛑. So gamma is the name of the
11/x game. With an 👁 to scalping to longer gamma & shorter deltas at each of our levels. If a decline finally comes mid/late next week, be careful buying the initial dip, as seasonality continues to weaken as we approach May & demand flows are waning w/ low short interest @
12/x record low levels, & decreased retail BTD’ers around to cushion the blow. Pair this all w/the potential energy of compressed IVOl & skew, & the tail’s potentially fatter than its been in a while w/an increasingly neg dist as well. If we can make it to 4/26 w/out a close
13/13 below the 20 day, we’ll know that the strength of the rally will continue until mid May. Good luck!!🍀 🍀
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1/x As we approach our long awaited🪟. It’s important to remember it’s NEVER an Easy Ride...Everything from the last 2 posts this week👇still applies, BUT...The strength of the NDX, the hugging & stretching of the 2 stdev of the 20 day, in the face of 46k lbs of JuneQ 4115 🍌’s
2/x from last week, the overextended retail sentiment & RSI’s, tells us the rally is hungry for more. We still expect the market to squeeze to ~3140 by Mon 4/12. @ 3140 is where things get interesting. w/the🪟open, this is where the market will begin to play🐔to shake the fragile
3/x paper hands & squeeze the last remaining 🌷‘s... So many are looking for this 3140 area to be a potential🔝, that my SPY-dey sense tells me we’ll potentially get a unimaginable stretch to a well deserved 420 SPY sometime before 4/20. My current est sees a potential 🎯
1/x Everything from Monday’s 🥐 Crumbs👇still applies, So I’ll keep this short & jammy...The speed of the rally has been telling. Despite bullish sentiment, a rally beyond the 2stdev up of the 20 day, continued bear steepening, NDX beta adjusted weakness, 🚨RSI’s, this market has
2/x barely flinched... that tells me this market has more work to do on the upside still. This correction in time tells me that the rally was just a little ahead of schedule, but it seems unlikely that the market is going to let all of those late to the party enough time to catch
3/x up to the tour bus. ***4140 sits overhead & Vanna👸& charm 🦥 are slated to host an epic late Friday/Early Monday special edition of the Wheel of Fortune. Gary has gorged himself on🍌& is unlikely to be hungry until at least next week. Sky high ratings could distract
1/x As is usually the case with most long weekends, but especially so w/The Easter Bunny, IVol got the living daylights beat out of it... it didn’t help that Gary was already well FED coming into EOQ & got a dump trunk full of 🍌’s from the Zookeepers @ JPMorgan in the form of
2/x the 46k SPX JuneQ 4115 Calls mentioned last week... Dealers are stuck & Gary’s as fat as I’ve seen him in over a year. So it is, despite a 72 hr 80 PT SPX rally, no surprise that we are stuck here at 2 stdev up on the 20 day, playing 🐔w/ our long 🎯4024*** w/ a 1 week SPX
3/x straddle trading only $48. 4042.25 *** sits closely overhead as well. & despite every flow reason to hope for more upside & every macro reason to hope for mean reversion, w/👸Vanna & 🦥Charm well rested, this market sits between a 🪨 & an immovable force until 4/12.But don’t
1/x it’s synthetic Friday... I’ll keep it short and sweet. Everything from Tuesday still applies👇. Vanna’s 👸back, & Gary 🦍is as well FED as ever. There was a massive quarterly rolled trade, JuneQ 3175-3760 ps vs 4115 C 45,600x that traded in SPX today that only reinforced this
2/x despite all the drama & headlines, stay the course, & expect more digestion w/an upward bias. To be clear, normally, given +seasonality, the reopening & the technical strength of the last week, we’d normally expect much higher prices, but 1)momentum has been waning 2) the 🐻
3/x steepening of the yield curve continues to scream, now having reached the > the 2/10 spread has seen since 6/2015 3) the DXY is 🆙 1.2% in a week 4) There has been little to no retail call buying response to the new stimmy tendies due to the reopening (as predicted)...but now
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
1/x Heck of a trip. On my ✈️ back, expect a full update tonight when I’m back at the desk... For the time being, if this little AM pullback is all that can be managed given, shockingly poor liquidity in a stable market amidst HF liquidation fears, & ‘significant’ bank losses.
2/x That should tell you something. Vanna is still not fully back until 3/31-4/1 but, as mentioned she just dialed in for a late 3/26 push. This is expected digestion following Friday’s steep ramp. Otherwise, systems look primed for a steady grind higher. Expect a bit of 🪓 to
3/x continue, but the next point of 🐔 is the 1.5 std dev up of the 20 day & the market has its 👀 set on playing there by the EOW. Gary is still in control, but should continue to loosen his grip, right as Vanna seems set to returns, so 4/1-4/12 could be a powerful 2 weeks...