Are we decoupling from rates?
It is supposed to move lower, but...
Don't forget NASDAQ and rates. Rates are at recent highs, but NASDAQ seems to be ignoring rates at the moment. Last time rates were here, NASDAQ was close to recent lows. The short term gap from yesterday continues to get wider. Is tech decoupling from rates? We are getting the feeling when something is supposed to move lower, but it refuses...
Source: Refinitiv
Will they be forced to chase?
Systematics exposure is at very low levels. Latest projected flow via GS:
one week: flat tape, buy +$13billion, up tape, buy +$45 billion, down tape, sell-$6 billion
one month: flat tape, buy +$39 billion, up tape, buy $192 billion, down tape, buy $6.3billion
Are we about to witness CTA's right tail nightmare?
Source: GS
If the squeeze continues...watch the right tail chasers
Will CTAs be as aggressive to the upside that they were in August? Upside convexity could easily kick in...
Source: GS
Retail Army selling the rally
Retail traders used to be happy dip buyers, but they were sellers for the second week in a row. Is this a contrarian factor? This past week they net sold -$1.1B. Notably they sold the rally on both Monday (SPX +2.59%) and Tuesday (+3.06%). Retail traders net sold -$2.4B of single stocks. Large cap tech names including AAPL (-$470MM), META (-$134MM), and GOOG (-$128MM), in particular, suffered from heavy selling. The last two weeks represented the worst selling in single stocks since March 2020. This bearish sentiment was also evident in the options market. Retail traders sold -$1.0B of delta.
Source: JPM retail radar
The max bull case
Maybe just a dream, but according to JPM this is the max bullish case:
1. Oct 13 CPI surprises to the downside, perhaps beating by 20-30bps
2 .earnings season beat expectations with the largest surprises coming from Consumers and Financials
3. Fed hikes 50bps in the November 2 meeting, with a data dependent outlook
4. Nov 10 CPI surprises to the downside with a larger absolute fall in both Headline and Core inflation; and
5. ISM/PMI data inflects higher during this period as job growth (NFP) falls to ~50k/month cooling wage growth.
That scenario could lead to both a lower terminal rate and to a quicker end to the tightening cycle, December vs. 23H1.
Who cares about the buyback black out?
Interesting stats via Goldman's Nocerino: "buybacks have been running 1.3x 2021 ADTV this week so far (new qtr,new dry powder?). Impressive given ~95% of Corporates are in their buyback blackout window where we usually see a 30% decline in volumes".
What happens past the black out period?
Source: Barclays
Bear vs bull reversal?
Latest AAII sentiment reading shows bears are reversing lower and bulls are showing first signs of life. Overall, levels remain depressed. We would love to see another leg higher in this bounce in order to see if sentiment changes...
Source: Refinitiv
Much ado...?
NASDAQ is at exactly the same levels we traded at two weeks ago. Lot of big takes on market direction, but nobody is in control, at least not for now...
Source: Refinitiv
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