1/x I learned a loooong time ago to never fight a well FED Gary 🦍...Despite a long list of reasons to be 🐻’ish, including: 1)Vanna 👸 & Charm 🦥 away @ the 🏖 for an extended vacation, 2) sentiment & positioning historically stretched by almost every metric, 3) a VVIX/VIX ratio
https://twitter.com/jam_croissant/status/1382981151300681729
2/x blinking 🚨, 4) earnings season after a massive run calling for what should be some natural profit taking, 5)an imminent Tax season & 1 year anniversary of longs also calling for profit taking selling flows, 6)seasonality waning as we head towards May, 7) & probably most
3/x importantly, a Fed that is more likely than expected to begin walking back its ultra loose rhetoric, as we continue to see upside surprises in NFP, earnings, & a dramatic acceleration in vaccination + a reopening of the domestic economy. But despite all of these, the SPX
4/x can hardly venture anything more than vaguely slowing momentum... that said, the 🪟 for ⚠️ is here & it pays to lean 🐻’ish, just NOT w/ long local SPX puts or VIX calls, at least not until we see a closing break of the 20 day. Instead the play is, as is often the case when
5/x Gary🦍 is this well FED, Dispersion. In particular, w/poor breadth & waning retail support in IWM & NDX (vs strong breadth in SPX) the play is continued hedges in these complexes versus short downside IVol in SPX...also, w/ a floor developing in SPX IVol & a cheap event Vol
6/x emerging in 4/28 w/an under appreciated coming FeD meeting, & long awaited, Biden address to a joint session of Congress, (a $26 1 day SPX straddle for the FED, & similar for Biden SOTU) NTM Tech earnings, the other trade is to continue to buy calendar spreads in SPX,selling
7/x 4/26 Ivol to buy 4/28 Ivol & later. Both of these events that are only 1.5-2 weeks out have the potential to be make big 🌊 in what has been a complacent backdrop...as mentioned, the Fed’s Bullard has already floated the idea that a taper conversation should begin when 75% of
8/x the population vaccinated, & all signs point to this occurring sometime before mid June, opening up the June 16th Fed meeting as a potential surprise change in rhetoric/policy. This paired w/a general whistling by the graveyard at play in markets, for a Biden admin
9/x that is likely to accelerate a vocal hard line towards issues like China’s 🇨🇳 human rights abuses & tech antitrust policy, as he begins to move past the Covid focus to broader policy initiatives...watch NDX/IWM for leadership to the downside. listen closely to Fed speakers
10/x & 👀 rates like a 🦅. 👂 to Biden surrogates for clues re: coming SOTU initiatives, particularly regarding antitrust & China🇨🇳, & most importantly watch Gary. Rising Ivol, if he becomes unFED w/ Fed commentary &/or a break of the 20 day, look out below. He is the only thing
11/x holding the market together in this🪟& starting from a lower level there is even more potential energy for problems as Tail Fragility continues to be high despite local iVol being dramatically oversupplied...& w/skew cheap, it continues to be a no 🧠‘er to own convexity
12/12 funded w/ local ivol. Good night! 😴 & Good luck!🍀 🍀 🍀
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