Upside panic - shorts carried out on stretchers

The Market Ear Picture

Never forget

Seasonality is strong going into year end, but are we front running it?

Source: Equity Clock


Where are the "max longs"?

Question: "What is your current equity positioning or sentiment in historical terms, expressed from most bearish (0th percentile) to most bullish (100th percentile)?"

Source: JPM cross-asset survey


Spot up, volatility up

SPX call chase panic in a pic. Market up and volatility up is the classical sign of people forced to buy upside exposure. Chart shows the SPX December 4500 call.

Source: Bloomberg/@danny_kirsch


It hurts

1. Hedge funds closing crowded rate hike bet related equity positions aggressively.

2. Russell squeezing...but huge pain seen in large and mid cap stuff. "The crowded spread for stocks >$5Bn with the crowding spread in both US and Europe reaching below -1.75%" writes UBS.

Very busy risk managers trying to "tame" the VaR today.

Source: UBS


SPX above the 100 day

Haven't seen the SPX trade well above the 100 day moving average in a while. First bigger resistance around the 4520 area.

Source: Refinitiv


Time to talk about 16k

NASDAQ is up 12% from October 26 lows. We are well above the 100 day, and approaching the huge 16k rapidly...

Source: Refinitiv


Massive put hate

Who needs puts when the market squeezes higher? Put call ratio collapsing as markets squeeze brutally higher. We are not there yet, but getting closer...

Source: Tradingview


The convexity implosion

SPX convexity has been repriced "violently" lower over the past weeks. All options have come down in price, this time puts as well. Goldman's derivatives guru Garrett also notes: "… this is one of the few times since 1996 that puts fall in the "cheap" category." Problem is bears are carried out on stretchers...Chart shows 6w ATM volatility normalized change over 2 weeks.

Source: GS


THE chart

The US 10 year trading below the massive 4.5% level, crushing the trend line that has been in place since May. Note we are below the 50 day, but well above the 200 day still.

Source: Refinitiv


Lower rates is so consensus

Everybody believes in the rates moving lower thesis.

Source: BofA


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