Waiting for the volatility puke...

The Market Ear Picture

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SPX - 4150/4200 is huge

SPX is trading just above the big 4150 level, but the entire 4150/4200 area is basically a very important "congestion" area. Note these levels have acted as both big supports before, as well as huge resistance levels. The SPX is above the 100 day, but well below the 200 day. We are still waiting for the last overshoot...

Source: Refinitiv

Bernstein expects another leg down in the market shortly....

...but are worried about the depressed sentiment....Join the club (it is getting hot in here...). Bernstein: "We are still early in the earnings downgrade cycle and outflows from equity funds have just started. Longer term measures of sentiment, however, are bearish enough to expect a positive return on equities with a horizon of 12 months or more"

Source: Sanford Bernstein

"Boss...I have no US equities"

In case you still wonder why things have squeezed hard. Hedgies are very "under positioned" to US equities.

Source: Nomura

CTAs could buy (much) more

Trend followers were killing it until this latest rally. They were very short just in time for the latest melt up. They have been covering shorts actively, but note they are just entering flat territory here. These strategies do not care about fundamentals, they chase trends. Could CTAs be the ones that get this going above 4200 and create that overshoot we have been talking about lately?

Source: Nomura

"Hedges only cost money bro"

We have heard this logic from various big PMs over the past days. This is probably a common view these days, but don't forget, people tend to load up on protection when vols are high and market moves lower. Nothing new really, but the crowd did it again, loaded up on puts at recent lows, and are now in full puke puts mode. We are not there yet, but it is soon time to "explore" tail hedges...

Source: Tradingview

More bears giving up

Latest AAII bearish reading shows bears continue to give up, but we are far from bears throwing in the towel...

Source: Refinitiv

Metaverse meltdown

The metaverse is in the midst of a real estate meltdown. Sales volumes and average prices for virtual land have plunged this year, part of a broader slide in crypto and non-fungible token prices. Can truth (IRL) now imitate art (metaverse)?

Source: The Information

Why isn't the "supply chain" basket doing better?

All sell-side models talk about significant easing but a basket of "beneficiaries of easing supply chain pressures" is not trading that well relative to the market.

Source: JPM

Recession vs recession - the daredevil trade crushing it

On June 17 we outlined our +TLT vs - USO logic in our post Dare the daredevil trade (more on the negative oil take here). The "recession vs recession" trade has performed well since then. Second chart shows the ratio "breaking up" today...

Source: Refinitiv

Source: Refinitiv

VIX - getting there

VIX has retraced the latest uptick, but note the VVIX is still above the most recent lows. Watch this closely as a constantly crashing VVIX could be reversing, and that matters. Let's see if we can get some more inverse panic during Friday that could open up for trades using cheap(er) options plays.

Source: Refinitiv