The Week Ahead
Folks…
I know I have promised the option strategies post for a while, it is coming!
S&P closed up the week +2%.
Stocks have bottomed!
I am hearing lots of talk of stocks bottoming. I do not agree. Nothing has changed - I expect a summer puke and a very volatile earnings season.
Right now the S&P trades at 3903. I expect in summer we shall see 35xx handle with the potential of 3400. I would like to see 3775 this week. If this can be met with force in the first two days of the week then I expect below 3700 to be explored.
In the week ahead… I remain short the 10yr and short ES. My main trade last week was long the 10yr yield via 10YN2 - it was 2.88 and ended the week @ 3.08. This is a longer-term trade and I believe the 10yr yield will see 3.75. In the next week - I believe the 10yr will be trading for ~3.25.
A subscriber asked me in the comments of my last post what about high-yield bonds? My response - “Could start buying HYG here. However... they might look like an opportunity here but like everything this year they could get hit more. The avg yield spread in high yield has widened by more than 200bps. Avg yield spread is ~550bps and compensating default risk. It all depends where you look for HY I guess. Avg price for HY bonds in the US is ~86 cents on the dollar. I guess HY is providing an opportunity here.”
When will the risk parity trade begin to work again?
The main trades for the week ahead for me are:
- re-entering TSLA short - now 752
- Buying vol
- Adding to my UK/Europe shorts
FX - We can see the dollar index explore 108 which would mean EURUSD will be trading extremely close to/at parity and USDJPY can explore 137+.
Commodities - I keep feeling an urge to buy gold but with the dollar right now, no thanks. Oil can explore below 100 this week.