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      Year-end melt-up on halt

      Is the (very consensus) year-end melt-up thesis running into some resistance? We are of course at the upper end of the range in S&P500 and now we are running into if not somewhat of a "supply tsunami" at least something that might act as a dampener on the rally. First, the estimates for month-end equity selling is now in the $30-40bn range, which is a lot from historical standards*. Second, ECM is really spiking - expect next 2 weeks to see a lot of follow-ons. Third, S&P500 dealers are long gamma which will create more supply to sell into eventual strength if we try to break-out. Maybe not enough to get outright bearish, but potentially at least enough to halt the rally and let the market digest for a while.

      * GS has $36bn - the 4th largest monthly sell estimate on record going back to 2000 and ranks in the 96th percentile amongst all buy and sell estimates in absolute $ value

      First chart shows SPX right up in the range highs.

      Second chart shows SPX gamma "healthy" slightly higher.

      Year-end melt-up on halt
      Source: Refinitiv
      Year-end melt-up on halt
      Source: Spotgamma
      Mighty KWEB

      China tech continues moving higher post that great break out we outlined early last week. Chart 2 shows BABA, a play we pointed out in late August (here). The stock broke above huge resistance levels and momentum is huge. Our general take on China tech (BABA included) is to not forget to roll those call spreads into higher strikes as we move higher.

      Mighty KWEB
      Source: LSEG Workspace
      Mighty KWEB
      Source: LSEG Workspace
      You are here

      VIX seasonality is about to kick in right now...

      You are here
      Source: Equity Clock
      VIX speculators mania

      Slightly simplified way of looking at things as there are many offsetting positions in the volatility world, but still worth taking a look at the great VIX spec short.

      VIX speculators mania
      Source: LSEG Workspace
      The VIX shorty

      Dealers running big VIX call shorts..."VIX total Vega to buy in a +10 shock now at 91% btwn ETNs and Dealer options positioning".

      The VIX shorty
      Source: Nomura