{{message}}
    yield curve steepening always happens into recessions
    yield curve steepening always happens into recessions
    JPM

    Get thefreeapp!

    Use the browser menubelowon the top rightand tap
    iOS Browser Menu Android Browser MenuAdd to Home Screen
    MOVE moving lower - will VIX catch up "violently"

    Equity vol is down lately, but remains elevated. Use elevated vol "wisely" to trade the "summer box" by net selling premium to enhance yield.

    MOVE moving lower - will VIX catch up "violently"
    Refinitiv
    Real rates lead equity volatility by a few years

    Soc Gen's model points to higher vol.

    One aspects to conisder given the latest move lower in VIX is the upcoming earnings season...

    Real rates lead equity volatility by a few years
    Soc Gen
    Goldman: wear a mask - save the economy

    1. GS argues that a national face mask mandate could partially substitute for renewed lockdowns.

    2. "We find that face masks are associated with significantly better coronavirus outcomes"

    3. a face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP.

    Goldman: wear a mask - save the economy
    Goldman
    in relative terms Jay is just a mini-Ben

    FED buying as a share of GDP, and as a share of equity market cap, it is not extreme vs ‘08-’09

    Jay "tiny" Powell.....

    in relative terms Jay is just a mini-Ben
    JPM
    VIX front month - still above "bloody Thursday" lows

    VIX is down recently, but still not cheap.

    VIX front month - still above "bloody Thursday" lows
    Refinitiv
    S&P - still below the highs on that "bloody Thursday" highs

    Range mania continues...

    S&P - still below the highs on that "bloody Thursday" highs
    Refinitiv
    Not so bearish any longer (#3)
    Not so bearish any longer (#3)
    EPFR
    Not so bearish any longer (#2)
    Not so bearish any longer (#2)
    Bloomberg
    Not so bearish any longer (#1)
    Not so bearish any longer (#1)
    JPM
    This is not a bullish rally

    As we pointed out last week, AAII bullish sentiment readings have collapsed. Not great if you are looking for a sharp move lower in equities. Of course, this is only one of several sentiment charts. Several others have become less "bearish"...

    This is not a bullish rally
    Refinitiv
    summer melt-up is now the base case

    The summer melt up narrative remains the base case as lack of liquidity plus strong cb/govt intervention make dips shallow and rallies aggressive. Add to that a new fresh round of sell-side negativity and the enormous Cash Mountain that shows signs of FOMO melt and we have plenty of ingredients for a "summer of equity love"...

    Prediction markets now imply a 55% probability that Democrats gain control of the White House as well as both chambers of Congress

    This would likely imply an increase in the federal corporate income tax rate from 21% to 28%, alongside higher personal taxes on upper income earners.

    Prediction markets now imply a 55% probability that Democrats gain control of the White House as well as both chambers of Congress
    RealClearPolitics
    Time for some divvy futures if everything is this awesome?

    SX5E vs SX5E 2023 divvy futs.

    Time for some divvy futures if everything is this awesome?
    Refinitiv
    Bernstein: US cases will reach 100k per day in mid July - and deaths will rise

    "We predict 100K cases/day by July 18, if current trends persist, and that COVID mortality will turn in the next two weeks. In 32 of 50 states, the disease is still accelerating. Thus far, stable and increasing infection rates have been more than offset by a decline in mortality (the case fatality rate, or CFR). However, we are already seeing the number of deaths increasing in some states and trends suggest deaths will accelerate even with further improvement in CFR. If the trend in improving case fatality rate (CFR) attenuates and no course correction occurs to slow infections, we could surpass our prior peak mortality rate by 3Q"

    Bernstein: US cases will reach 100k per day in mid July - and deaths will rise
    Sanford Bernstein
    Donald's Dollar

    Trump and DCY moving in tandem...

    Donald's Dollar
    Norde/Macrobond
    Baltic dry - can't get enough

    Beyond the V...

    Baltic dry - can't get enough
    Refinitiv
    2nd derivative of FED BS expansion peaking
    2nd derivative of FED BS expansion peaking
    JPM
    2nd derivative of data improvement peaking

    2nd derivative of activity improvement likely peaking in July.

    US CESI has moved from record lows at the start of May to record highs currently. The bulk of the 2nd derivative improvement in activity momentum has likely already happened.

    The risk is that dataflow doesn’t just flatten out, but that we actually see a renewed move lower if virus impact worsens.

    2nd derivative of data improvement peaking
    JPM
    Russell - perfect bounce...but will it take out 200 day moving?

    Chase laggards time again?

    For the relative "players", time to look at the relative long Russel over NASDAQ trade again as the ratio trades in the upper part of the range?

    click arrow on chart to toggle.

    Russell - perfect bounce...but will it take out 200 day moving?
    Refinitiv
    Russell - perfect bounce...but will it take out 200 day moving?
    Refinitiv
    Tech timing - "I did not learn anything"

    “I didn’t learn anything. I already knew that I wasn’t supposed to do that. I was just an emotional basket-case and I couldn’t help myself,” - Stanley Druckenmiller on buying $6 billion worth of tech stocks in march 2000

    (in six weeks he had left Soros and had lost $3 billion in that one play...)

    Tech timing - is this the 99-vintage all over again?

    Even Sequoia lost money on their 99 vintage VC fund

    This shows the importance of macro timing.

    1. funds started just before '99-'03 were amazing

    2. funds started at dotcom bubble peak were bad

    3. remaining years were mixed

    Tech timing - is this the 99-vintage all over again?
    S&P only catching up to Dr Copper

    Real economy or not, but this is playing out. Would be interesting to see Spuz try Hartnett's "sell the 3250 rip" scenario...

    S&P only catching up to Dr Copper
    Refinitiv
    US earnings revisions turns positive
    US earnings revisions turns positive
    SEB X-Asset
    GS cutting US GDP numbers

    Re-acceleration of Covid makes GS cut outlook for service consumption growth in July/August. They downgrade Q3 GDP forecast from +33% (quarter-on-quarter annualized) to 25%.

    "The sharp increase in confirmed coronavirus infections in the US has raised fears that the recovery might soon stall. Although a significant part of the increase reflects higher testing volumes—which together with younger patients and better treatments will likely keep measured fatality rates much lower than in the March/April wave—a broader look at the CDC criteria for reopening shows that not only new cases but also positive test rates, the share of doctor visits for covid-like symptoms, and hospital capacity utilization have deteriorated meaningfully in the last few weeks. Moreover, these pressures have already persuaded many states and cities to put reopening on hold or actually roll it back"

    Jan Hatzius, Goldman Sachs
    EU bank divvies

    rebased lower for longer...?

    EU bank divvies
    Bloomberg
      Russell - perfect bounce...but will it take out 200 day moving?

      Chase laggards time again?

      For the relative "players", time to look at the relative long Russel over NASDAQ trade again as the ratio trades in the upper part of the range?

      click arrow on chart to toggle.

      Russell - perfect bounce...but will it take out 200 day moving?
      Refinitiv
      Russell - perfect bounce...but will it take out 200 day moving?
      Refinitiv
      Tech timing - is this the 99-vintage all over again?

      Even Sequoia lost money on their 99 vintage VC fund

      This shows the importance of macro timing.

      1. funds started just before '99-'03 were amazing

      2. funds started at dotcom bubble peak were bad

      3. remaining years were mixed

      Tech timing - is this the 99-vintage all over again?
      Wirecard’s core business has been lossmaking for years, audit shows

      FT writes that according to KPMG operating performance in Europe and the Americas far worse then previously known,

      On Sunday Olaf Scholz said;

      “we have so far only seen the tip of the iceberg”

      FT article,

      https://www.ft.com/content/f697a093-4e1b

      What is your plan for Biden?

      Betting markets continue to see Biden over Trump by a huge margin.

      Trump's handling of Corona and Black lives matter are the main reasons for this "divergence".

      Key points are;

      1, taxes - see our post on the issue from earlier this week,https://themarketear.com/posts/cOpW7C99a

      a possible effect of such a move would be for US equities to underperform relative other countries.

      2, health care and Biden's environmental push (among other things net zero emissions for US by 2050....)

      3, Tech - this remains the big question and needs much more clarity (one way to play it is long NASDAQ vol, VXN vs VIX or European vol)

      What is your plan for Biden?
      Refinitiv
      Oil - if pigs could fly

      Jet fuel not taking off...

      Oil - if pigs could fly
      MPAS
      Charlie McElligott Explains the Upside Catalyst for Equity Market

      Listen to Nomura's Charlie and his latest thoughts on the market, interview starts 24 min into the podcast,

      https://www.macrovoices.com/867-macrovoi

      NASDAQ - let's see what next week offers, but do not fight the trend channel and the 21 day moving average...

      ...not getting excited on the downside until we start trading below those levels.

      NASDAQ - let's see what next week offers, but do not fight the trend channel and the 21 day moving average...
      Refinitiv
      The most important chart to watch after the long weekend

      How will fatalities curve develop during the coming two weeks?

      The most important chart to watch after the long weekend
      Nordea/Macrobond
      Fed's BS - just a blip? - what about VIX

      Fed balance sheet and VIX.

      Fed's BS - just a blip? - what about VIX
      Refinitiv
      Credit not as exuberant as equity volatility

      Watch this space should we get a bigger gap. iTraxx main vs V2X.

      Credit not as exuberant as equity volatility
      Refinitiv
      Cuts, cuts, cuts, but not interest rate cuts

      EPS...

      Cuts, cuts, cuts, but not interest rate cuts
      Factset
      SPY - what is the market pricing?

      Below is a chart showing how SPY vol structure has shifted from the "bloody" Thursday sell off June 11, few days later June 16 and finally today.

      Market has gone from pricing approx 2% daily moves for SPY to 1.4% daily moves.

      As we have been outlining for past weeks, equity volatility has been trading too rich to current "narratives".

      We still believe in the "summer box" trading, but given the recent fall in vols, the relative "edge" of the logic is less attractive at these vol levels.

      SPY - what is the market pricing?
      TME
      More upside?

      GS out with a new report of using flow and liquidity top model SPX. They basically incorporate an analysis of ETFs, in house flow data and liquidity.

      Conclusion, there is more upside...

      "Our analysis suggests the S&P 500 has underperformed liquidity-adjusted

      investment flows"

      More upside?
      GS
      Back to kill volatility?

      FX and equity vols continue moving lower. We have had the "sell premium logic for the past 10 days" and remain comfortable with this view for now. We will reconsider that logic when more people start pushing this idea, the first ones just started...

      Back to kill volatility?
      Refinitiv
      You think NASDAQ and tech is hot - obesity is even hotter

      From the top:

      Obesity index, SLIMD,

      Internet ETF, FDN,

      NASDAQ.

      Go figure

      You think NASDAQ and tech is hot - obesity is even hotter
      Refinitiv
      How big is the real Covid 19 risk?
      How big is the real Covid 19 risk?
      Bernstein
      The lockdown death of a 20-year-old day trader

      The suicide of Alex Kearns — who thought he had lost heavily — has triggered calls for reform of online brokerages

      Via FT - Free to read

      https://www.ft.com/content/45d0a047-360f

      The chart below shows the extreme development in short term trading in options.

      The lockdown death of a 20-year-old day trader
      GS
      Recall Harnett's summer "box"?

      "sell the 3250 rip" and "buy the 2950 dip" in S&P500

      Recall Harnett's summer "box"?
      Refinitiv
      LQD and JNK since the "original" Fed announcement in early April - both +8.5%
      LQD and JNK since the "original" Fed announcement in early April - both +8.5%
      Refinitiv
      Summer box - Spuz stuck in the box and VIX fading...

      ...until the market is ready fr the next narrative which is not now...

      Summer box - Spuz stuck in the box and VIX fading...
      Refinitiv
      What if "we" are hedging the wrong tail?

      Frequent readers of TME know we consider Chris Cole of Artemis one of the better guys when it comes to thinking "beyond" volatility.

      This piece written years ago is somewhat technical, but provides some great insights into hedging and mispricing risks under a "hyperinflation" scenario. We are probably not there, but CBs have been very active and one should consider a small if at least...

      As Cole writes:

      "Print too little money and we cascade off the waterfall like the Great Depression

      of the 1930s... print too much and we burn like the Weimar Republic Germany in the 1920s... fail to harness the trade winds

      and we sink like Japan in the 1990s"

      Full must read note in case you missed it a few years ago, before Robin Hood existed....

      https://static1.squarespace.com/static/5

      What if "we" are hedging the wrong tail?
      Wiki
      Remember when bears used to compete pointing out how bad Dr copper was trading?

      The economy, or inflation kicking in, or both_ Who knows, but this time the Spuz is lagging....

      Remember when bears used to compete pointing out how bad Dr copper was trading?
      Refinitiv
      Tesla is +55% from the low print on May 1 when Elon said the stock was overvalued...
      Tesla is +55% from the low print on May 1 when Elon said the stock was overvalued...
      Refinitiv
      Emerging markets - the most rational vol market?

      EEM has done little over past weeks, small down from recent highs and EM "VIX", VXEEM, has moved lower as we are realizing very low volatility.

      Let's see if Spuz and VIX get inspired....

      Emerging markets - the most rational vol market?
      Refinitiv
      Don't fight the Fed and don't fight NASDAQ 21 day moving average

      The bounce perfection continues...until it does not...

      Don't fight the Fed and don't fight NASDAQ 21 day moving average
      Refinitiv