The Week Ahead
Volume 80 - Christmas isn't this early
If you would thoroughly know anything, teach it to others.
-- Tryon Edwards
Bad news? Buy it.
Good news? Buy it.
November saw the largest easing in financial conditions of any single month in the past forty years… This has been the fastest and most aggressive stop-in I have ever seen; SPX is now +19.67% YTD and NDX +46.23% YTD. Relentless vol selling and systematic buying helped push markets where we are, but the big question everyone asks themselves is where next???
While equities don’t show much sign of an imminent dump into year-end, there are a few signs of overcrowding. The same applies to gold, which traded at fresh ATH this week as real rates crater (~77.5% of Friday’s GLD 0.00%↑ option flow were calls). 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).
It doesn’t seem to be a market with much conviction. Most people I talk to who usually have conviction don’t and seem to prefer renting upside. On the other hand… Downside implied vol is cheap and worth owning.
My December downside protection… 4100/4200 SPX (worthless), 12/29 SPX 4300/4400 currently costs around 4.3.
Heads up… After this post, there will be only one more Week Ahead for the rest of the year. I will only be active on the private Twitter for subscribers and writing the Year Ahead post. This will be a 20-30 minute read jam-packed with cross-asset insight, from FX trades to high conviction single stock picks.
The usual charts…
Single Stock, Index, Vol
5D % perf
SPX +0.77%
NDX +0.10%
RTY +3.05%
GS Soft Landing +3.53%
GS Most Short Rolling +8.10%
GS Non Profitable Tech +10.27%
VIX +0.17v
VVIX +2.9v
MAGMA basket -138bp
Nasdaq-100 stocks above 20d - 80%, Nasdaq-100 stocks above 200d - 72%, S&P 500 stocks above 200d 62.8%, S&P 100 stocks above 200d - 65%.
Interesting week…