The weakest link in a chain is the strongest because it can break it.
-- Stanislaw J Lec
Good evening all, and a Happy Hanukkah to all who celebrate.
I hope some of you listened to last week’s opener shared to both free and paid subscribers… “I’m not against fading the move in gold… Like doing it via GC 12/26 2020P, which costs 5.7 or a GC 12/26 2050/2000 bear put, which costs 9.5 (mid).” By Tuesday the 2020p was up over 500% and the spread +315%. I have attached last week’s post below.
FOMC Week with CPI Tuesday and PPI Wednesday… financial conditions are loose, markets point to the Fed being more hawkish, and data points to the Fed being more dovish. I will write more on the Fed later in the post.
This is the last week of the year with real volume as we enter the home straight into the holiday season. Positioning in the US is distorted with dealers long a metric tonne of gamma, causing this choppy environment, EU a tad cleaner.
14 sessions to go till year-end; your performance numbers aren’t lying here… Those who have performed well are wishing to hold on to their gains and not doing much, the guys who’ve underperformed are chasing into year-end. Like I said last week, no matter if one has performed well or poorly, there doesn’t seem to be much conviction right now. A lot of upside renting. Gross high, nets low. Those participants whose year was made by being OW the Mag7 names ask themselves about next year… will Mag7 outperform, or will the S&P 493 be the better hold.
Soft landing pricing is baked in here, good news seems to be good news for stocks as consensus for the soft landing grows. (NFP 199k vs 185k est, Unemployment -0.2%, AHE +0.4% vs 0.3% est and ISM services 52.7 vs 52). The other big thought on many minds is when bad news becomes bad news.
Quite a lot to discuss, so I will dig in…
The Usual Charts
EUR was an easy fade at 1.10; I'm surprised cable hasn’t followed suit. One way to trade this would be buying EUR/GBP (Currently 0.8569) with a ~0.848 stop and a 0.868 target.
Single Stock, Index, Vol
Downside protection… 3mo out, two SX5E ideas.