Some thoughts to start the week:
The struggle for direction remains a challenge. You will doubtless hear as many champions for the bullish case as the bearish one. From our perspective….we remain “in the middle” The longer we coil in the middle….the more powerful the “move” from the middle will be.
We are now past a couple of weeks of significant catalysts including CPI, FOMC, VIXperation, & Quad-Witching.
We are now approaching the end of the quarter and the beginning of earnings season. “Headline” risk will be in play this week regarding anything with banks and Federal support of them.
What are we observing:
- Still a “Fiscal” Market. The Fed is fighting against secular inflation….this is a fight not seen in decades.
- The “pain” trade remains missing out on the upside…0DTE call buyers continue to show up to the upside. Participation is not “sticky” as big cash remains on the sidelines.
- “Rates” impact is being replaced by “Bank Stress” impact.
- SPX has gone nowhere for a year!!
Where is there opportunity?:
- Macro narrative and price remain divergent. Forward earnings guidance is sour and economic headwinds are high….yet price (particularly in tech) remains strong.
- Mean reversion of equities back to inventory “value” until real conviction breaks us out of the “middle”
VIX Curve: Whatever fear we had built up to get us through FOMC and OPEX….it’s gone. We have quickly pushed back toward complacency and the initial “reversion” move off the curve is now over. $SPY remains trapped in the middle and right at the VPOC of the last rolling year.
- SHORT END CURVE (VIX9D-VIX): -1.11 NORMAL (<-4 is complacent, >0 is fearful)
- LONG END CURVE (VIX9D-VIX1Y): -5.16 NORMAL (<-7 is complacent, >0 is fearful)
- COMBINED CURVE: -4.05 NORMAL (<-7 is complacent, >-1 is fearful)
- AMD and MSFT are in extreme
- ES is balanced and ready to move
- Bonds balanced and ready to move
- Notes in extreme
- Copper is balanced and ready to move
PLAN FOR MONDAY:
PLAN FOR MONDAY:
PLAN FOR MONDAY:
PLAN FOR MONDAY:
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Define your risk and trade well!
