Climactic Tantrum
Hello All,
It’s been a bit of a volatile week to start as the indices all kicked off the week well in the green, but following todays economic data (prices paid coming in higher than expected) along with Trump’s comments / denying the Washington Post Tariff headline, it’s sparked a bit of volatility & as of now, Spooz and the Q’s are the worst performing indexes on the week whereas the Dow & Small-caps are the best performing index on the week… a bit of rotationary forces underway.
We recently published our ‘25 Outlook / Year Ahead which has a plethora of coverage on a wide variety of topics / themes as we get ready to head into ‘25 after coming off a strong ‘24 & for those who would like to read & prep for ‘25, I included a link to the report / write-up here.
Lastly, earlier this week, I published the follow up educational piece which has been highly requested and majority of the topics covered were all suggested by you all, so I hope you find good benefit.
For those who may have missed, a link to Educational Piece Part: Deux can be found here.
For those who may have missed the first educational piece, I included the range of topics covered below along with a link to the piece for those who would like to go back and read:
- General background / knowledge on all option strategies
- In-depth talk on risk / reversals & how to go about expressing / utilizing them
- Options Structuring
- When to used naked calls / puts vs. spreads
- Choosing expiration dates
- Identifying key pivots / supports / resistance zones
- General briefing on stock gaps
- What to look for in regards to fundamentals
- Implementing fundamental / macro / technicals into a trade
- Hedging
- Creating risk/reward setups
- Taking profits / managing losses
- Overall Process
- Book recommendations
A link to the first educational write-up can be found here.
I’m not going to waste much more time & am going to jump right into the recap below.
- SPY
It’s been a bit of a volatile week on both the upside / downside in Spooz & as of now, Spooz is down just over 100bps on the week & its in part been driven by a bit of an unwind in momentum / general factor wind, as under the hood, we’ve been seeing a bit of rotation which actually has bolstered our performance thus far as the week has kicked off.
In regard to economic data, the big headline of the week thus far has been the big beat in prices paid rising back to Feb ‘23 levels & it’s hard to justify this being an actual material new trend as we saw the same sort of spike in early ‘24 which then turned out to be a nothing burger… doesn’t mean its to be dismissed, but also doesn’t mean that one # sets a complete new trend either. In regard to the remainder of the week, tomorrow we have ADP #’s along with Jobless claims & then Thursday the markets are closed due to the passing of Carter & lastly, we have NFP #’s on Friday.
As we mentioned above, but a big driver of todays action specifically was the big beat in prices paid, but still don’t think you can come to a new conclusion / make new assumptions of a respective trend as one datapoint doesn’t set a new trend… especially considering we saw the exact same thing happen in January of ‘24. Nevertheless, jobs (JOLTs) data also ended up coming in better than expected, although some were questioning the report as a potential fluke, but heading into Friday, Jobs are expected to come in around 150kish with the UER remaining unchanged (drop off in jobs expected due to strikes as prior month was 200k+)… the biggest worries for this market at the very moment seem to be driven by growth & inflation re-acceleration fears & thats arguably played somewhat of a role with the recent decline in bonds… especially today specifically given the large drop off post ISM data this morning. I also think the market is throwing a bit of a tantrum, as after today, no cuts are priced into the market through July of this year & we’re nearly pricing in zero cuts for the entirety of ‘25… it doesn’t take much for sentiment to swing in this market, but I think its going to come down to better than expected inflation data from here on out & or economic data materially slowing which I don’t think is too far out of the cards given the move in bonds in such a short period of time.
In looking at Spooz as we head into the remainder of the week, as of now, Spooz has remained in a trend of lower highs / lower lows (very briefly made a lower low this past week), so the big question as of now is if the 5850s lows get retested again, but instead of coming in as support if they just end up blowing out to the downside & we get a bit of a flush to fill the election gap below in the mid-5700s & or if we see Spooz continue to try to carve out a bottom near 5850ish & we’re more or less rangebound between 5850 / 6050 until one side gives in / we get some sort of resolve to either the upside or downside. If bonds do remain under pressure for the remainder of the week & see no relief, it wouldn’t be of too much surprise if we went ahead and tested last week lows near 5850ish (just below), which likely would come on a firm break of 4.7 on the 10Y & we’d likely see a test of the 100d… on the contrary, if we were to see some relief in bonds as the 10Y looks to reject 4.7, I think the “we’re so back / it’s so over” range likely remains until we get a bigger datapoint / justification to resolve this recent chop to either the upside or downside.
