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    Fed must speak up

    After this week's violent moves in yields the market is begging the Fed for a closer guidance. March FOMC will provide such an occasion, unless they "need" to explain stuff earlier, this coming week already.

    Fed is facing a delicate balance here; they want markets to respond to an improving economy (higher yields), but they do not want too violent moves in yields as it can delay the recovery.

    As Bofa points out there are 2 primary channels;

    1, higher borrowing costs could dampen rate sensitive sectors of the economy too agressively

    2, a big fall in equities and credit spread widening would lead to a negative feedback loop (note we are writing this with SPX down 3.2% from ATH...)

    March will definitely be interesting, and we could potentially get Fed headlines hitting the tape this week already. As Bofa concludes;

    1, Qualitative guidance over quantitative

    2. “Buzz” words - expectations

    3. Waning slowly about policy changes - 6 mth window to set expectations could be appropriate

    As a gentle reminder, equities do not like violent rate rises. Second chart shows SPX performance vs st dev moves in rates.

    Fed must speak up
    Source: BofA
    Fed must speak up
    Source: GS

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    First casualties of "retail squeezers" already here, but they don't know it yet

    Nokia was one of the "attacked" stocks yesterday. Going into the long logic people on forums pumped yesterday for Nokia is not even worth mentioning.

    For now squeezing a few hedge funds has worked, but these moves are basically just a play on a broken market and many retail guys will be left with huge losses when this passes.

    So for the Nokia trade now. It started going up in Europe yesterday, yes Nokia is a Finnish company, not American. The main market is Europe, not US, although there is a listed ADR on NYSE. After Europe closed, people started "chasing" Nokia in the US leg (red arrow where Europe closed in the chart). Nokia extended the move by some 75% after Europe closed, all happening in a few minutes.

    So people start chasing a stock in the secondary market, Europe is the primary market for Nokia trading. Obviously there are shareholders in the US leg as well, many US based funds can only hold the ADR for example. So retail punters start chasing the relatively illiquid Nokia ADR and manage to lift it to the moon in a short time span. Obviously HFT firms trade the ADR as pure momentum trading strategies, but it does take some time before real "flow", sellers, wake up to this move. European fund managers do not look at the US ADR overly actively as their day has ended. It would take 10,15,20 minutes before they get the call from their local broker telling them Nokia is up 20, 30, 40% from the European close (markets are not efficient). Unless there are news out, beyond Redditt, some PMs start selling the share, converting them via the custodian bank later into European shares (or via prop trading firms that can facilitate the conversion, although this business, ADR "arbitrage" has faded for years).

    Obviously there are some scared shorts, especially in these times, that probably started chasing the stock as well as it spiked in US trading only. You can basically call this an inverse flash crash move, triggered by retail, but is an affect of a broken market.

    So what has happened?

    Nokia in Europe is basically unchanged as of writing. It needs to go up by 22% from here in order to catch up to where it closed in US. It needs to gain almost 85% from here in order to reach the highs of where the ADR printed highs yesterday.

    Many US retail punters will have a rude awakening when they see how much they lost in Nokia, but on the other hand, who said you should be making money not understanding what you do.

    First casualties of "retail squeezers" already here, but they don't know it yet
    Source: Refinitiv