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    Momentum is trying to stage a comeback

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    Go with the crowd: being a hedge fund VIP stock has been good this year...

    Go with the crowd: being a hedge fund VIP stock has been good this year...
    Thomson Reuters

    the 3 month run in perspective

    1. The S&P 500 has generated a return of 11% during the past three months on realized volatility of 7% (annualized). The 1.7 return/volatility ratio ranks in the 99thpercentile since 1950.

    2. Looking at 3-month periods with return/volatility ratios of 1.5 or greater in the last 70 years, the median S&P 500 return during the subsequent month was -0.2%. However, the median 3-month and 12-month returns were +6% and +13%.

    David Kostin

    A lot has happened since Greta sailed to NY - Tesla is +100%, Beyond is down 50%...

    ...but is Beyond showing signs of life?

    Mother of catch up trades in the making?

    A lot has happened since Greta sailed to NY - Tesla is +100%, Beyond is down 50%...
    Thomson Reuters

    PMIs

    PMIs
    JPM

    3 near term concerns

    1) not much has been discussed on US/China trade phase 2...

    2) January 31st is the official departure day of the UK from the EU. Trade negotiations news will probably not only be smooth sailing

    3) will just "in-line" results be enough to sustain equities at these levels?

    Valuation: US

    Kostin: "at 19x forward EPS, equity valuations are above historical averages but appear consistent with the low interest rate environment..."

    Valuation: US
    Goldman

    Valuation: FTSE 350

    Valuation: FTSE 350
    Goldman

    Valuation: Japan

    Valuation: Japan
    Goldman

    Valuation: KOPSI >1 SD expensive

    Chart: 12-month forward P/E for MSCI Korea, since Jan 2008

    Valuation: KOPSI >1 SD expensive
    Quantwise

    Valuation: China

    12-month forward P/E for MSCI China, past 10 years

    Valuation: China
    FactSet / GS

    Valuation: Europe trying to break out to 6 year P/E highs...

    Valuation: Europe trying to break out to 6 year P/E highs...
    Goldman

    Energy dog - worst performing sector 3rd week in row

    1. Energy claimed the ‘worst performing sector’ distinction for the 3rd consecutive week, ultimately lagging the S&P 500’s -1.0% correction by a considerable -320 bps…

    2. XOP (E&P) and OIH (Services) both down meaningfully more, -8.6% and -8.1%, respectively

    3. AMZ (MLPs) also sold off a substantial -5.7%.

    Themes & Dream: YTD

    Thematic basket relative performance

    Themes & Dream: YTD
    Goldman

    VIX - don't buy protection when you must, buy it while you can

    Remember "our" VIX guy not long ago explaining all was great. He still has the 100% inverted track record.

    VIX - don't buy protection when you must, buy it while you can
    Thomson Reuters

    Frequent readers of TME know the 2013 S&P analogy well, but what happened next?

    2014 started up, but in late January things changed abruptly. It would be almost too perfect if we are to follow the same psychological set up.

    Frequent readers of TME know the 2013 S&P analogy well, but what happened next?
    Thomson Reuters

    The source of dispersion has become more micro-drive

     The source of dispersion has become more micro-drive
    Goldman

    20 year low in inflation expectations

    20 year low in inflation expectations
    ECB

    Cross-asset: YTD

    Cross-asset: YTD
    GS

    Cross-asset: the week that was

    Cross-asset: the week that was
    GS

    NASDAQ - the 2018 analogy playing out well

    NASDAQ - the 2018 analogy playing out well
    @thehawktrader

    Market loves Goldilocks

    Market loves Goldilocks
    Goldman

    VIX futures spread moving sharply higher

    2 versus 8 months spread below. Seems picking up dimes in front of the steamroller "vega" neutral strategy blowing up for some "smart" guys.

    VIX futures spread moving sharply higher
    Thomson Reuters

    FXI - down 6,3% in 5 sessions

    Not a happy Lunar celebrations for most (note main market was closed overnight).

    FXI - down 6,3% in 5 sessions
    Thomson Reuters

    Apple - is this a shooting star candle?

    Note the elevated Apple "VIX", VXAPL.

    If you really must hold Apple longs, overwriting strategies in this name look interesting.

    Apple - is this a shooting star candle?
    Thomson Reuters

    VIX +18%, VXN +15%, VXEEM +12%, TYVIX +4%, OIV +8%, GVZ +7%

      NASDAQ - the 2018 analogy playing out well

      NASDAQ - the 2018 analogy playing out well
      @thehawktrader

      VIX futures spread moving sharply higher

      2 versus 8 months spread below. Seems picking up dimes in front of the steamroller "vega" neutral strategy blowing up for some "smart" guys.

      VIX futures spread moving sharply higher
      Thomson Reuters

      Apple - is this a shooting star candle?

      Note the elevated Apple "VIX", VXAPL.

      If you really must hold Apple longs, overwriting strategies in this name look interesting.

      Apple - is this a shooting star candle?
      Thomson Reuters

      EURUSD volatility crashing further

      6 month vols new all time low....on a daily basis.

      EURUSD volatility crashing further
      Thomson Reuters

      Fed's BS and volatility

      Fed's BS expansion has helped equities, but more importantly the expansion has managed suppressing volatility across assets.

      We at TME consider this more important as this is where the real risk is "managed" and volatility is the asset of our choice to use for playing possibly "distorted" asset prices.

      Remember bond vol index, MOVE index, that refused coming down pre the latest Fed BS expansion. Well, the Fed "fixed" that.

      Fed's BS and volatility
      Thomson Reuters

      but Fed chilling?

      Fed's BS taking a small "breather" here as per the latest update.

      This itself is not the panic chart many will be pointing out later today.

      but Fed chilling?
      Thomson Reuters

      US credit protection - popping some lately

      Nothing huge at the moment, but watch CDX IG for possible signs of risk in the credit space.

      Below is the CDX IG inverted versus S&P chart.

      US credit protection - popping some lately
      Thomson Reuters

      Why QE4 may eventually prove inevitable

      "If increasing USD liquidity is needed to re-incentivize foreigners to buy into the Treasury market, then the Fed may have to buy more than $ 20-30bn a month for another looooong while, especially if the current market QE-psychology loses steam when the Fed tapers the current $ 60bn a month purchase tempo."

      Great latest piece by Nordea worth a read,

      https://e-markets.nordea.com/#!/article/

      Remember Fed these days when everyone is busy tracking the vaccine experts' latest tweet?

      One of the better Fed charts, by the great macro team at Nordea.

      Remember Fed these days when everyone is busy tracking the vaccine experts' latest tweet?
      Thomson Reuters

      FXI - crashes further on heavy volume

      From upper part of the channel to the lower part in no time.

      FXI - crashes further on heavy volume
      Thomson Reuters

      Howard Marks current views

      1. Are we elevated? Yes. Is it a bubble top? I don’t think so, not yet..

      2. We are at the upper part of the cycle, the “advanced stage” of the cycle…

      3. ….but from any point in the cycle anything can happen…

      4. The probability distribution is negatively skewed however - but it does not mean that we will go down tomorrow or even this year

      5. It is however a better time to decrease risk

      6. There is real FOMO, pro-risk behavior in the market right now

      7. You should have less risk on than normal, time to take some chips off the table

      8. We will continue to keep the risk off and prepare for the next downturn and hope there will be one…

      20VC podcast interview

      Remember high yield? - yes it is full of oil related "exposure"

      Time to look at HYG closely post the latest oil implosion.

      Remember high yield? - yes it is full of oil related "exposure"
      Thomson Reuters

      Will S&P care about oil (ever again)?

      Oil is a story itself, with massive longs caught wrong and confused post the Iran and Libya "events", but there is a "virus" part to the oil story as well.

      S&P does not care about much at the moment, but will this change?

      S&P versus oil below.

      Will S&P care about oil (ever again)?
      Thomson Reuters

      Watch Emerging Markets for the "real" risk

      Most people do not trade the EM space risk, but this is one of the risk areas that has a lot of the "hidden" risk, not visible unless you trade some of that risk.

      A week ago we shared JPM's quant guru Kolanovic's view on EEM offering cheap hedges.

      ""The strong spot performance has resulted from material contributions from both its local equity and FX legs, with 20% of the return coming from EM FX strength. We recommend longer-dated EEM puts to position for potential upside in implied volatility while protecting recent gains."

      TME comment, agreed on the above and EEM spot looks a bit "stretched".

      EEM volatility, VXEEM, started moving sharply higher 2 days ago, but not many were "spotting" it. We believe the prudent investor should look at all EM related risk here. Viruses or not, this space has showed recent "stress", that could feed over to DM risk.

      Below is the VXEEM versus VIX chart we have been pointing out over past days. Longer term dislocations are not common, so watch the gap closely, especially as people have become rather complacent about risk.

      Link to the EEM chart last week,

      https://themarketear.com/posts/c25QSzA40

      Watch Emerging Markets for the "real" risk
      Thomson Reuters

      JPY continues to disagree with S&P - now getting rather "extreme"

      JPY continues to disagree with S&P  - now getting rather "extreme"
      Thomson Reuters

      The question is - does your SPX exposure care or not care about China?

      China has not been a part of the recent narrative, but things could easily change focus...

      The question is - does your SPX exposure care or not care about China?
      Thomson Reuters

      China's "fast" money index, ChiNext, -3,5%

      The trend channel is still intact, and note how far down the 50 day average is as well as the channel lows.

      China's "fast" money index, ChiNext, -3,5%
      Thomson Reuters

      Is oil volatility telling us something?

      Oil volatility, OIV, versus VIX gap is getting rather wide here. If oil is the economy or not we leave to others to decide, but keep this gap on the risk radar going forward.

      Is oil volatility telling us something?
      Thomson Reuters

      Oil - Wednesday weakness is brutal for anyone long oil....

      as it pushes the HOW MANY? question till the following Friday and right now the HOW MANY long speculators are left question is a very key piece of information.

      h/t @RobertMacMinn, the man with oil in his veins.

      Oil - Wednesday weakness is brutal for anyone long oil....
      MPAS

      CTAs going all in equities?

      According to the chart below by Nomura it definitely looks so, and CTA hedgie we track that provides daily p/l has ben adding to gains over past days (+2.7% YTD), but hard to say where it comes from on a daily basis. The December fund report revealed VaR in equities was sharply down, and commodities up, so that is a bit of a contradiction to the chart below.

      CTAs going all in equities?
      Nomura

      Macau versus Hong Kong - zero sum game?

      Average daily rates for next day reservations in 4/5 star hotels in Macau and Hong Kong needs little commenting. HK had a pick up (dead cat bounce) but is back to recent lows again, and that is prior to the virus outbreak.

      Macau versus Hong Kong - zero sum game?
      Bernstein

      Kill vol, EURUSD volatility - crashing to new all time lows

      6 month vols are sold hard, again...

      Kill vol, EURUSD volatility - crashing to new all time lows
      Thomson Reuters

      Achtung Bund!

      German 10 year yield at very big and important levels here, last -0.25%.

      Watch the trend line since August lows closely.

      Achtung Bund!
      Thomson Reuters

      Oil - approaching make or break levels

      Recall oil "speculators" are still very long and the past Iran and Libya "events" have managed creating an interesting psychological set up in oil, and it is not to the upside.

      Oil and oil volatility below.

      Oil - approaching make or break levels

      US 10 year -getting tighter and tighter...

      ...inside the big formation. Time to break out soon?

      US 10 year -getting tighter and tighter...
      Thomson Reuters