Sign up here for the free newsletter
MS’ QDS model suggests that retail has been a consistent seller of equities in the last several months - which is expected to continue into YE / into 2023). From the QDS team:
"The only other time when retail has been a consecutive seller of single-names three months in a row was 4Q18, during which retail also sold ~$70B of single stocks. However, that does not mean that retail has yet ‘capitulated’ to the same degree that they did in 4Q18. Retail has been a much bigger buyer of single stocks in the last three years (demand is on the order of ~3x bigger than it was in 2016-2018).
Looking in relative terms, in 4Q18, retail sold 30-40% of the single names bought in the prior three years. Applying that to today’s numbers would imply that retail could sell a further $100-150B of single stocks (beyond the $70bn already sold since April)."
1. Higher-for-longer rates & restrictive policy cause something to break before the Fed is willing to cut
2. Recession finally arrives
3. Optimistic equity volatility finally recouples higher to elevated macro uncertainty & still-stressed rates volatility
SPX has basically traded in the 4520/4580 range since mid November. Long gamma dealers have been "choking on theta" for the past weeks.
The AAII bull - bear spread has exploded to the upside. We haven't seen such a big jump in the spread in a very long time. We have reversed on much smaller moves of the spread at previous occasions...
The VVIX squeeze we outlined last week continues. The gap vs VIX is huge. Last time the VVIX was here, VIX was at 19 ish...
Despite all the excitement, both ways, the DXY is trading without a trend, stuck in a range since last November.
US 10 year down since last Friday....and NASDAQ also down.