1/x HF positioning has been in the 98-99th %’ile for some time….But Gary’s been so well FED for so long that it hasn’t mattered. This is just 1 of several major drivers of the tail fragility that I’ve been so adamant about. So here we are, 1)W/ Vanna/Charm on a week long vacay
2/x 2)breadth collapsing to historic lows by some metrics 3) midterm momentum flagging 4) underlying dispersion dragging the SPX down kicking & screaming 5)& whether it’s the s&p’s 20 day, 50 day, & major trend lines from 3/2020 lows @ 4165 or other indices which have long broken
3/x trend we’re getting technical breaks now across the full spectrum of assets… 5) suspect strength in the form of an already damaged NDX/tech complex. Primarily driven by short covering 6) Gary’s been unquestionably the lynch pin until now, but the Fed’s removal of Gary’s 🍌’s
4/x in the face of a liquidity bubble will eventually jar the market free from his grasp… our expectations were this grasp would hold until 7/12, but his grasp is definitely loosening now…it’s important to note that he’s still quite over FED in the ST & might still be able to
5/x hold it together. It’s going to take some heavy lifting to take all the supply away. After all, Here we are again approaching our old JPM 4115 🧲… w/ only 1.5 weeks until the EOQ tidal 🌊 of more 🍌’s… So, despite a undoubtedly 🐻 setup & a likely overshoot liquidation down
6/x to <4060 and possible even to 3990-4000 in the ST, in order to shake retail sentiment & deleverage the street, but ultimately, that is not that far & it is important to remember the Fed is actually selling Calls here & dampening the upside part of the distribution…
7/x DONT FIGHT THE FED. The economy is improving & the rest of the 🌎 is slowly coming back on line, THIS is the safest bet right now & the part of the distribution that is most overvalued. Look to sell the rips w/ calls under hedged, as the risk of a correlation break w/ market
8/x down/ fixed strike SPX Vol down is fairly high as we head into EOQ & the 7/4 holiday. Downside calendars are also a great play as Ivol for post 7/12 on back into the fall should continue to drift higher on flat term structure & an increasingly dangerous back half of the year.
9/x Be 💦, my friends. Tho we’re likely to get ST Ivol support in the mornings & broadly into EOQ, & should see countertrend moves as a result, we are entering an increasingly dangerous period, rife w/ fragility. Own the tail post 7/12… funded w/ those actively managed short
10/10 calls & local Ivol. 👀 the 1 stdev down of the 20 day for Resistance on a potential AM Wanda retracement. Good luck! 🍀
NOT INVESTMENT ADVICE…
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