The Week and Remainder of the Year Ahead
Volume 31 - will Santa or the Grinch pay Wall St a visit?
I think the past week was the most interesting this year. As mentioned on Twitter “Fun fact about Thursday’s rally… Thursday saw the third largest daily market cap increase in the history of the stock market - a whopping +$1.7tn. 13th March 2020 holds the gold medal at +$1.9tn 20th March 2020 holds the silver medal at +$1.7tn”.
As stated last week:
“On the other hand, if it were to come in cooler we could easily see the S&P @ 3910. Potentially spooz could trade higher if the dollar index could wipe out 109.”
“Market participants have found themselves yet again struggling to find longs and massively net short. CTAs 98% short on SPX/NDX and the banks are struggling for trade ideas. Whilst I am net short and buying vol, I will begin to start buying stocks to hedge”
I went overweight META 0.00%↑ that week at an 8% weighting. The additional 2% is via short puts. A rare 10% weighting… META closed the week +24.4%
Thursday’s move was a pure example of a volume explosion on little liquidity with so many participants short. GS Non-Profitable Tech basket GSXUNPTC was +15% on Thursday. Great rally the last two days of the week, but very unhealthy. Don’t think anyone is seeing through the cycle, yet. Just short covering.
The market has been patiently waiting for an excuse to rally like it did and CPI was a viable reason to do so. The soft October CPI print definitely supports the “slower pace hikes for longer” narrative but I think Jay & Co will be looking for a bit more than one print! it’s interesting that lots of sell-side are saying we have seen the inflation peak, I’m not on that bus yet. Need to see more. I cannot see through the cycle off the back of one print. But sure, it’s a welcome sign of progress.
Delta dynamics remain to dominate day-to-day market moves. In hindsight, I should’ve realised the market was going to ramp… I managed to get out of the whole CPI debacle by being more market neutral but I didn’t get to take full advantage of this weeks move. Though, this week saw the third largest daily market cap increase in history, a lot of the move up was driven largely by short covers and A lot less longs. For macro products, short covers large drove the net buying. Interestingly, single stocks net buying was muted with short covers outpacing long sales.
Will the end-of-year “melt-up” continue or will it be greeted with extreme force?
Max bearishness to become max FOMO?