The Week Ahead
Volume 94 - Masters Week
Masters week… as a golfer myself, I’d love nothing more than Tiger to win. Head over to see my latest tweet for a chance to win a free month.
It was another strong week for subscribers. EUR/CAD was trimmed to perfection, oil calls performed well, and SPX options received $90 in premium. As well as some valuable lessons, I hope? Selling 0DTE SPX straddles on UK bank holidays when the US is open… When a straddle is too cheap as data continues to make SPX realise more than implied…
On the topic of data and straddles… it’s going to be a data-heavy week. What’s to come other than 8 Fed speakers? Just an FYI… Goolsbee (a FOMC non-voter) and Kashkari (a FOMC non-voter) both speak today.
NY Fed 1yr Inflation Expectations - Monday
March CPI (MoM 0.4% est vs 0.4% prior, YoY 3.5% est vs 3.2% prior) (Core MoM 0.3% est vs 0.4% prior, YoY 3.7% est vs 3.8% prior) - Wednesday
Fed minutes - Wednesday
March PPI & Initial Jobless Claims - Thursday
MI Consumer Sentiment - Friday
Earnings season begins… BLK, C, JPM, PGR, STT, WFC - Friday
Global
Japan PPI - Tuesday 7.50pm ET
UK RICS house price balance - Wednesday 7pm ET
Chinese PPI and CPI 9.30pm ET
ECB Thursday 8.15am ET
Japan Industrial Production Friday 0:30am ET
UK industrial production 2am ET
Regarding the AI theme, we have the Google Cloud Next conference on 4/9-11 and the MRVL AI Analyst meeting on 4/11.
Fresh quarter, here’s 20% off for 20; the offer only applies to annual subscriptions.
“Why is USD not moving with rates?” has been one of the most common inbounds this week.
You could put it down to several things, one being positioning. The market is long USD and has got more long as more hawkishness comes from the Fed and carry remains very attractive compared to peers. But still, the market continues to price in the first cut being in June (I don’t necessarily agree). Another thing that could be holding the USD down is international asset flows… more the outflows from the US assets.
The most important data point for this week is the March CPI, which comes on Wednesday. See, I know we all joke that each CPI print is the most important data print of our life (until the next one). But if the print were to come in hot like the past few prints, the market could take this as a new trend and finally react as it traditionally should. There is no point in sharing my expectations for the S&P reaction scenarios when we are a few days away, but I will share it the night before the print on the private Twitter, as always.
Goolsbee and Kashkari today… just a brief note on what was said last time we heard from them. Last time out (4th April), Goolsbee stated that “the biggest danger to the inflation picture in my view… the continued high inflation in housing services. I have been expecting it to come down more quickly than it has. If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target.” I will be interested to see if he has any different colour after 4 days of not hearing him. Kashkari, we also heard on the 4th, “In March, I had jotted down two rate cuts this year if inflation continues to fall back towards our 2% target. If we continue to see inflation moving sideways, then that would make me question whether we needed to do those rate cuts at all.”
Single Stock, Index & Vol
I came into the year bearish and soon realised that I had to adapt and be more neutral. This has worked… thus far. I'm trading what's in front of me, short-term trades. Anyway, positioning has barely budged. Nets are high in the top percentiles, Retail is long and has been buying all year, and CTAs are still MAX long and not budging, but the hedge fund community has turned bearish and has been fading the rally for a few weeks. HFs have been heavily shorting retail ETFs, and last week, overall, their short-selling outweighed their long-buying, according to prime data across several shops.
JP Morgan has Quant Equity net leverage falling from recent highs, which is worth noting as Quant Equity nets correlate strongly with equities.