ET Reddit Mentions | ChartExchange

Hey everyone, I’m travelling this week, so the posting schedule might be off by an hour or two.
Let's get to it. A considerable amount of short options positioning cleared with OPEX last week but as those contracts expired, some of the stabilising market maker exposure rolled off with them as well .
That reduction in MM positioning now gives both the index and individual stocks a bit more freedom to move which is v important to know as we are heading into a week with a couple of large catalysts.
This is the current implied volatility of the VIX and as you can see the NVDA earnings and Jackson Hole have will likely move the markets quite a bit. Do note that high IV does not mean the market will fall or rise, it means that the market is expecting large swings in either direction
https://preview.redd.it/ldu0xpd7dblh1.png?width=1080&format=png&auto=webp&s=cc4b5da5a5c51ae212185dcbefc79b6bb50e66d1
NVDA earnings has the potential to move the markets as much as Jackson hole and can v quickly become an index level event if they disappoint and take down the AI trade with them.
If this proves to be the case I do expect Jackson Hole to stabilise the market or start a squeeze higher bc Jackson Hole could actually be a good opportunity for the Fed to clear up some of the uncertainty around its communication approach, which has been contributing to higher volatility across the US rates curve and also ties with my thesis that Treasury and the Fed are replicating the Yellen regime.
This is Goldman data and you can see the effect has been particularly pronounced at the front end.
https://preview.redd.it/76d948b8dblh1.png?width=1080&format=png&auto=webp&s=4a7469eeb95f34b2d3d76466387175d442aac7d2
The shift in the Fed’s communication approach has made the path of policy less predictable.
Thats important because higher uncertainty around the policy path normally translates into a higher term premium, so part of the recent increase in term premium, and by extension the push in long-end yields to new highs, can be traced back to the way the Fed has been communicating.
If we instead get a clearer framework for how the Fed intends to react to incoming data, some of that premium can start coming out.
We will have to be especially nimble though as if there’s a move lower of about 3.5% in the SPY and 5% or more in the Qs systematic funds will start to sell and estimates are for about 115B
https://preview.redd.it/mgvzao51eblh1.png?width=1399&format=png&auto=webp&s=820fbf622b9838894b8e89627d5d0d4f2e173f10
An interesting thing I was tracking on Friday is that breadth was also surprisingly strong as we saw just 6 stocks making new lows, which is the fewest since April. The last time the number was lower was during the early stages of what eventually became a pretty aggressive two-month rally.
https://preview.redd.it/xrw31gn9dblh1.png?width=1080&format=png&auto=webp&s=c7ce011fc533e76269b970fa32b02e19f5c59e7c
Toda’s other event is the Treasury Secretary speaking at 2:00pm ET when he will talk about tougher US economic measures against Iran’s trading partners, but I’ll also be listening for any additional guidance around the Treasury’s intervention plans.
By the look of things, the market isn’t expecting much on that front right now judging by the VVIX (VIX of the VIX)
A couple of words on gold
Gold has now hit the $4,700 level I set at the start of the month and I think another push towards $5,000 could come fairly quickly if the current momentum continues.
A lot more people are piling into the trade and options demand is increasing quite aggressively. As dealers hedge that exposure, it can add fuel to the move and increase its magnitude.
Just keep in mind that this mechanic works both ways.
If rate-hike probabilities start picking up again and gold sells off aggressively, those same hedging flows can start working against the bulls and accelerate the move lower instead.
With this being said, positioning on the GLD etf is building on $450 which is likely the next target if ther eare no macro surprises.
https://preview.redd.it/vpcbffjcdblh1.png?width=993&format=png&auto=webp&s=740d4578991229c53999cf0965f2743a108a32c4
On to the SPY - I remain cautious here as mentioned previously I’ve closed the longs and will likely be sitting on my hands as we trade near the 765 level which, if broken will likely start a sharp move lower as market makers hedge in the current negative volatility regime.
As we’ve already seen a couple of bounce of this level, for now, the first level I am willing to play a bounce from is $750 or a move above the $771 level.
https://preview.redd.it/soug2d7ddblh1.png?width=996&format=png&auto=webp&s=5deea1bb0d3e5587de9148c0ef450a7436877d89
For the Qs are looking for a move towards $700 and market makers will hedge with price action all the way down if it starts going lower.
https://preview.redd.it/asv1r91edblh1.png?width=937&format=png&auto=webp&s=8a6bf926419abacd3d8514587199299f47d16da7

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