The Week Ahead
Volume 130 - NOWHERE TO HIDE!
I had my week ahead ready to post at 00:00 BST but every index call I made was hit in the first minutes of Globex. Anyway, here we are.
I have been wrong recently, but last week felt a lot more in sync with markets. The Nasdaq and S&P were off nearly 10% in two sessions, levels of panic we haven’t seen since Covid or the GFC. Call it Liberation Day, call it tariffs, call it whatever you like, what matters is the damage it’s done to sentiment. It’s been real, and it’s been messy.
But here’s what I actually think: “Liberation Day” was just an accelerator. We were already heading in this direction; we just arrived here faster. When you take a break and look… earnings expectations had turned, and markets were simply too high. All tariffs did was amplify the unwind. Simple.
Positioning’s now incredibly light. Hedge funds dumped equities last week at a record pace, CTAs are outright short, retail’s backing away (they were naturally quite quiet last week with tax cut-offs), and no one’s brave enough to step in. ETFs as a percentage of total trading volume reached 36% on Friday, well above the YTD average of 28%. Over 100 million options contracts were traded on Friday - the most ever and the VIX posted its largest weekly change on record above 45 (+23.6v for the week). To say the least, the pain trade has hit HARD!
No hero moves from me this week. I took some 0DTE SPX puts on Friday which nearly went 20x - not trying to be clever, just sensible. Keep it small, tactical and manage risk. There’s absolutely no point fighting this tape until we see some clarity (Trump blinks and walks tariffs back down). Right now, there’s none. Still holding short ES1 from 5420, the only trade I have put on was last night, which was a short on ZT at 104’141 with an initial target of 104 and 104’222 stop - this was shared on the private Twitter.
Stagflation fears are real again. Tariffs = higher inflation and lower growth, and the Fed's is right to be concerned. Forget about quick rate cuts, markets are pricing them, but it feels premature and overdone to have five cuts priced in for this year. This week's CPI print could reinforce the inflation narrative and make it clear the Fed isn't about to pivot, I will touch base more on this in my mid-week thoughts.
If anything, we have seen Trump double down over the weekend, with no shift in the narrative regarding tariffs. I think markets were expecting some headlines over the weekend, if I am honest.