The Week Ahead
Volume 100 - Did Roaring Kitty just kill the GME rally?
I am alive! Apologies there have been no Week Ahead posts; only paid subscribers know why… For the right reasons, there haven’t been, so what better post than the 100th Volume of the Week Ahead to share the best news of my life? I am now a father. My lovely boy was born in London on the 30th of May. Though my life has changed in the best way possible, nothing will change with Fed’s Gazette, though I do plan on launching a Discord linked with Substack in the coming week, where I will share my intraday thoughts and ideas (I will continue posting on the private Twitter account).
As it’s the 100th Volume, here’s a discount code for 10 new subscribers.
I'd like to make a brief note on GameStop GME 0.00%↑ as it’s a popular topic at the moment. I don’t have any position right now, but I expect that the stock is on its last legs. Looking back historically, I could be totally wrong, but I do feel like this recent rally is one last pathetic attempt of retail trying to squeeze the stock. I find the Reddit WSB guys much more amusing than the GME lot on Twitter due to their ability to laugh at themselves and know they are gamblers. Roaring Kitty should have stayed a hero; after Friday’s live stream, there appeared to be somewhat of a bitter tone coming from retail GME chasers hoping he’d exercise the calls he holds. Anyway… my view from here isn’t all that specific; I’d expect GME to trade <15 by the end of the year. I just don’t think retail has the dry powder to get this thing to squeeze like it did before.
The latest positions in the book are long CL at 74.8, ADBE 0.00%↑ long at 456.75 and AAPL 0.00%↑ 06/21 195C at 3.8.
Equities are in a resilient tape. The NFP print was not what the market was expecting. After that, there was a clear tilt for the USD upside, but it does seem there’s some hesitancy about pushing the dollar upside. Though there are clear catalysts for further USD upside coming this week - CPI and FOMC. My bias for USD upside has not changed, especially with Macron calling for a snap election after the success of the far-right in the European Parliament elections over the weekend. Some pessimism early today towards both SX5E and EUR. EUR/GBP has at long last broken 0.8500 and 1m vols on EUR/USD has spiked to 6v from 5.2v earlier. No new FX ideas here, but carry remains attractive (for now), so keep owning it. JPY remains the preferred funder for me, as you will see when I discuss both FOMC and BoJ meetings later in the post.
Back on to the NFP number, there was a decline in the vacancy rate from the JOLTS data. Add that in with the week survey data earlier last week, which caused the market to start thinking of deterioration in the near future and, in turn, thinking that a July cut could be possible. The May employment numbers quickly crapped on that parade.
As you all know, I am expecting no cuts this year but with the potential for a 25bps cut in December.