Friday Macros

Central Banks Get Pushed to Back...Options and Flows Dominate ..Quad Witching

Treasuries mildly steepened this morning but just as we started writing we see that the long end is catching a bid... 10 years which had been at 1.43 at 6 am have now just skyrocketed quickly to 1.39... Clearly no one is paying attention to the Fed or the BOE, but these are moves that reflect some risk off trading and fears... The Nasdaq, which most of this year was trading as a long duration asset and had a relatively high correlation of rates, no longer seems to be the case... Nasdaq futures are down 180 points and accelerating...

Equities are being moved by gamma and quadruple witching today... We have the simultaneous expiration of stock index futures , stock index options, stock options and single stock futures... We repeat what we said last night. 70 million single name options expire today, which is a December record... More than 100 million in total options expiring... We think today's move in the Nasdaq and NYFaang is gamma related into today's expiration... To quote Charlie McElligott..."more Gamma and Vanna hedging slingshot equities"... We had to look Vanna up as our remembrance was of a game show host... Nonetheless, in English, dealers are short puts, meaning they have to hedge more as the markets sink... Which is what today will be about at least to start the day.... There is nothing wrong fundamentally, although an article from the FT shows that many of the underlying equities in the indices are in correction territory.

Fed/Central Banks... The last two speakers of the year today...Williams is on CNBC at 8.30... And Waller at 1 PM... The latter is turning out to be the most interesting of the speakers as he has a different background and tends to tell it as it is... As for Central Banks, The ECB comment that they will not raise rates in 2022 puts pressure on the Fed dot plot that they could go 3-4 times next year... Both the BOE and the Fed seem to be in hawkish territory... The ECB sees inflation normalizing next year, but they still doubled their inflation forecast from 1.7 to 3.2...if you missed it this morning....GERMAN PPI CAME OUT AT 19.2% TODAY...and we laugh that Laguarde sees inflation normalizing in 2022. They will be forced to raise rates, but for now markets are focusing on positions rather than outlook.

Rates... Big steepener put on this morning 5/30 in the futures market... Already under water... The simple answer to yesterday's move was that globally, most trades were betting on a hawkish Fed... Problem is with so little liquidity, they got the verbiage they wanted but not the follow through... Hence many got stopped out across futures and cash.. 2 years went from .70 to .60 .. 5 years from 1.29 to 1.15... As for 10 years, the next resistance is 1.35... And if equities get ugly this afternoon, then 1.22 after that... As for flatteners/steepeners, our longer view is that we are done with the flattener for now... If 5/30 gets well through 56 we will revisit that view...

The only good thing overnight we saw was an article out of South Africa

"(BN) South Africa Hospitalization Rate Plunges in Omicron Wave

This will be another choppy day based on option expiration and lack of liquidity

Quad witch........fund rebalancing.....I'm going to watch AAPL today.....with it's recent runup to such high value it makes me wonder if some funds aren't going to have to sell some of that as it's so bloated......I'd be a better man if I just shut all the windows and did nothing today, so we'll see.

Tesla is going to $800 isn't it?

Ragoo said:

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Tesla is going to $800 isn't it?

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If so...

McInnis 03 said:

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Turkish Markets on are on their second circuit breaker to the downside.........

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Fortunately the Turkish market is a gnat on a fly's ass in terms of global exposure.

TSLA has a nice trend line over the last 2 years. If it comes back to 800 in the next month, it could be a very good buy.