Chase it until it breaks

The biggest threat to bears

"Nobody" plans to increase equity exposure...

Source: JPM

Shorts are back

It didn't take much (rising yields) in order to get the equity crowd to start shorting last week. According to GS PB, the macro shorting activity was the largest in almost a year.

Source: GS

Short interest

Ideally you need to see short interest tank if this market is to see a proper pullback...

Source: GS

Crap is hot

Chasing crap extended today again. Performance since May; MEME up 34%, most shorted up 30% and NASDAQ up "only" 15%.

Source: Refinitiv

Puts are for wimps

Put call ratio puking to new recent lows as nobody is interested in puts these days. Usually the crowd tends to hate puts when they should love them, and vice versa, but maybe this time is different...

Source: Tradingview

Play it via SPX call calendars

BofA calls it "chase it until it breaks"...that is if you must chase. Main bullets from their great derivatives team:

1. Recent surge in US rates threatens current low equity volatility levels amidst macro instability and low single stock correlation.

2. The timing of potential equity selloff and rise in index volatility is challenging to predict due to increased dependence of S&P on Tech volatility.

3. Continual strategies involve chasing upside via risk-limited structures and preparing for a possible shock...S&P call calendars are preferred for asymmetric upside due to high rates and steep volatility term structure, which allows selling longer-dated calls to fund shorter-dated ATM calls.

The greatest volatility divide remains alive

Bond volatility refuses easing much post the latest run up. Equity fear on the other hand remains rather depressed. Chart showing MOVE vs VOLI (basically ATM VIX).

Source: Refinitiv

Rates uncertainty and equity multiples

The gap is getting rather wide...

Source: MS

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