The Week Ahead
Good morning,
The most important inflation print of our lives is to come this week (until the next). Last week was solid; the trade of the week was the ABNB 160P, which we paid ~5 for. USD/JPY continues to trickle higher after buying the dip at 152.8 in the first week of May.
Last week was a slow one for stocks, with the lowest volume since Thanksgiving. Tech performance isn't all that impressive, though, when you think about it. NDX is +7.94% YTD. QQQE is + 2.39%. Even the FTSE is up +9.2%. Utes are +12.54%, and both energy and financial names are up 11%… I’d say the noise factor for tech remains at a high. Earnings season is nearly over, but NVDA is still to come; positioning feels a lot cleaner after the April Opex puke.
Going into this week, the last trade that I put on was a 1M straddle. Implied volatility screens are cheap and worth owning tactically for a spike in IV.
FX
Today, FX will be quite a short section; refer to my recent posts for colour… no change in stance here at all. It seems other G10 banks are willing to diverge from the Fed, so there’s potential we will see FX start to pick up. BoE’s Bailey said that there is “no law which says that the Fed must move first” - quite telling. On the topic of the BoE, the meeting was dovish and the overall takeaway from it was the first cut will come in June.
Carry remains attractive here, and positioning looks cleaner in USD/JPY. CTAs were likely stopped out on the interventions; however, as the dip was bought and the trend has continued - I’d expect the small community to have started to buy already.
Single Stocks, Index & Vol
Data to come this week (eastern time)…
May 13 - NY Fed 1yr Inflation Expectations 11am
May 14 - NFIB Small Business Optimism 7am, PPI 8.30am
May 15 - Mortgage Applications 7am, CPI, Real AHE, Retail Sales 8.30am
May 16 - Initial Jobless Claims, Housing Starts 8.30am
May 17 - Leading Index 10am
Earnings to watch this week…
May 14 - HD, NXT
May 15 - CSCO, DT, RILY, JD
May 16 - AMAT, DE, TTWO, WMT
May 17 - ROST
China remains a key theme; read last week’s post on my comments about what I actually think triggered the move/multi-sigma increase in options volume. Positioning remains light, and technicals are supportive, so there’s potential that the move to the upside can continue. There is also potential that China will stay in its ~2-year range, and one can consider selling upside. Valuations are attractive on both relative and attractive valuations, but one thing I like to monitor for Chinese names is CNH… USD/CNH has a negative correlation with Chinese indices and remains well supported; if this continues, which I expect it will… should be a headwind for Chinese names.
Roaring Kitty is back… and as you know from my short in AMC, I do love shorting a shitco. In this case, I’d rather sell upside spreads a month out or something. Strikes haven’t been decided yet.
One can’t deny that US equities are looking a tad lethargic. Positioning is not at its highs, and volumes were poor last week (as I mentioned earlier).