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Saturday, November 26, 2022


Stocks & Bonds Sink As Fed’s Bullard Hammers “Pivot” Hopes

Jim Bullard started the day off on an uber-hawkish note suggesting The Fed wasn’t in restrictive territory yet and that the terminal rate could be as high as 7%. Kashkari toed the hawkish line too later in the day, warning that there’s “not much signs of cooling demand yet.”

That sent terminal rate expectations hawkishly surging back above 5% (and also hawkishly reduced expectations of a post-recession rate-cut cycle). This erased most of the post-CPI pivot plunge in terminal rate expectations….

Source: Bloomberg

Looks like 3rd time was not the charm!!

Source: Bloomberg

Ugly housing data and a Philly Fed collapse did not help as continuing jobless claims ticked up and stocks extended losses through the cash open but then the machines stepped back in and levitated stocks (The Dow and Nasdaq) back to unchanged before fading back lower in the afternoon. The last 30 minutes of the day saw a bid reappear which lifted The Dow all the way back to basically unchanged. Small Caps were the laggards followed by the S&P and Nasdaq…

The S&P bounced perfectly off its 100DMA…

Unprofitable tech was dumped today too after its recent face-ripping rise…

Source: Bloomberg

As ‘Most-Shorted’ stocks gave up half of the post-CPI squeeze gains…

Source: Bloomberg

After a dramatic curve flattening yesterday, Treasuries were dumped across the curve today with the short-end once again underperforming (2Y +10bps, 30Y +5bps). On the week, the belly of the curve is flat, short-end is dramatically higher in yield and long-end notably lower in yield…

Source: Bloomberg

Pushing the yield curve (2s30s in this case) back to September lows (over 60bps inverted at its nadir today)…

Source: Bloomberg

The dollar rallied today, erasing about half of Friday’s slide…

Source: Bloomberg

An austere UK budget sent cable lower…

Source: Bloomberg

Bitcoin took a pause today, ending the day practically unchanged after a narrow range…

Source: Bloomberg

Gold slipped lower on the day but held above $1750…

Oil prices tumbled once again today, with WTI back at one-month lows trading with a $81 handle…

Finally, we have plotted SPX price vs OPEX days (red X’s) below and as you can see these OPEX dates are often key market turning points. The August selloff was certainly exacerbated by Jackson Hole, but the key insight here is that the onset of negative gamma adds to volatility…

As SpotGamma explains: said another way – markets are more sensitive to headlines and other events when there are larger put positions relative to calls. Which is a big problem as the current put/call ratio is basically at a record high…

Source: Bloomberg

We think it’s likely that any weakness next week reads more like consolidation and therefore remains fairly contained. The potential for more violent downside (i.e. new YTD lows) increases into the end of month & early December due to the large DEC OPEX

Source: Bloomberg

It couldn’t happen again, right?

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