Thread by @dampedspring

Is it time to reverse my max bullish stance on SPX - a thread. Tl;dr No!
Every discretionary trading bone in my body is saying "Andy awesome call let's flip to the dark side. 400 handles. Unbelievably overbought on greed, RSI, any metric really. Technicals bouncing up against

Long term upper bound trend line. Textbook inverse head and shoulders. Omg the VIX went up on a Friday. And of course the CPI/PPI are going to be way above consensus. Take profits you idiot and go short." All of these reasons are very compelling. I hear and see all of them.

While a 50bp selloff in $SPX is almost certain in the near term.I am not going to be tempted by the dark side. If you have followed me over any amount of time you know I have no bias toward any asset or assets in general in my search for alpha. I just reread 4 DSR's to remind me

On 9/2 I made an outlandish switch to my target on $SPX saying $5000 by EOY and added a normal sized long. Bad timing to say the least. Here is the link. img1.wsimg.com/blobby/go/10b3…

On 9/13 I reminded my clients about the magnet of 4430 and how if we got below 4430 the lead up to 9/30 would be messy. I was also all over Twitter on this and on 9/20 went max long SPY at 432.5 4 points above the eventual bottom. Link img1.wsimg.com/blobby/go/10b3…

All throughout September I was clear that the "correction" was catalyzed by the magnet and had drawn in many bears unaware or unbelieving of the technical situation as the principal driver. The bond market puke joined the fun but was all part of a deleveraging panic on taper.

It was a taper tantrum in a teapot. Link img1.wsimg.com/blobby/go/10b3… this technical catalyst and panic was likely to be overdone and my Sept 2 timing while early was quickly reversed.

So we really haven't come that far. Since 9/2 the market is up 3.5%. Sure it's up 400 handles from when I called the bottom. But who cares as that was a well understood technical. And the bond market has completely changed. New content on here is my call to go max long bonds

Link. I was 10bp late but that's fine. img1.wsimg.com/blobby/go/10b3…

So what if I woke up from a deep sleep and missed everything and decided to enter the market based on how the world works and what is happening in the world today

TBC this is literally what I do every day. Fundamentals look like this.Inflation expectations are extremely high right now for coming prints and high even for long term inflation.Growth will be well above trend this year and at least through 1H 2023 but a slow down is discounted

Monetary policy remains extremely accommodative and this weeks FOMC and possible brainard appointment represent significant dovish risk. The shift to long term Private savings of the 2TN of fiscal spending related consumption is on going generating a "Private QE"

Pfizer pill represents a massive increase in the slack of the labor force which will slow or eliminate wage inflation. BIF passed representing a buoy to long term growth. BBB will eventually pass with the financial asset penalties non existent and also buoy long term growth

Bond market investors were offside in many ways. The big way is under exposed to long term bonds. If I am right on inflation expectations and the Pfizer impact bonds will definitely hit my target of 1.8 on 30s. In fact mortgage convexity flows could slap 10's below 1.4 on Monday!

Equity investors have incentive to delay selling until 2022 to differ taxes on realized gains. Same applies to crypto as an aside. Also active managers are underperforming passive and will chase the best performers. $NVDA 👀 these flows are powerful

They will persist literally until New Year's Eve and suddenly stop. Some believe this others don't there will be an opportunity to fade the Santa effect but the sharpe ratio in doing it today sucks. It's so early.

Valuation. I get it. They aren't long term cheap. A couple of key points on my 5000 target. My 210 earnings estimate is well below street consensus which itself is rising I have not increased the target based on the fall in long bond yields and my expectations of further falls.

My risk premium on equities is equal to the pre Covid risk premium despite the 7TN dual fiscal and monetary stimulus. This respects the taper but is still very conservative given monetary conditions.

So the dark side is very compelling today and will only get more tempting if the market turns down in the days to come. But I will resist and avoid a bear trap given all I see about the world today. If all else fails I will eat another McRib.