Well, well, well. The 10Y yield clipped 1.466% on Thursday morning, after spiking yesterday to 1.39%. As a reminder, according to Nomura, the 1.50% level is a CTA short trigger level, and could have a major negative impact on equity prices if breached. On top of that, we have several investment banks watching the 2% level, where, Morgan Stanley in particular, sees upwards of a 22% correction possible on the Nasdaq.
We're seeing strong flows into Financials off the back of the recent bond market weakness, as well as notable strength in Energy, off the back of higher crude prices. We just saw initial claims come in at 730k vs the 820k estimate. Continuing claims hit 4.41 million, vs the prior print of 4.52 million. Durable Goods came in at 3.4% vs the 1.2% expected, with ex-transportation at 1.4% vs the expected 0.6%. Finally, Q4 GDP came in at 4.1% as expected. Pending home sales figures are out at 10AM.
For those of you who missed the GME, and other "most shorted stocks" explosion of up to 300%+ yesterday, like me, just remember that what goes up, must come down, and there are many ways to profit from this type of volatility. One thing I wouldn't want to be, at any point, is long GME, or AMC.
Futures are trading in the red this morning, with the S&P down around 0.40%, the Russell flat, and the Nasdaq down around 1%. No real surprises to write home about after yesterday's garbage rhetoric from Powell, who mentioned as many times as possible (in my words), that the Fed's favorite game to play is to spoon feed Wall Street, while Main Street learns to wipe their asses with the US Dollar.
With Vix back at nose bleed levels this morning (22.50), and stocks back near ATH's, it's time to reassess the outlook for the next 12 months, minimum. Imagine subscribing to the current level of implied equity risk, with next to no return as the likely reward. What's the best reason to be long equities right now? Inflation? Economic recovery? Vaccines? Hope? It sure isn't for the potential upside, or attractive risk/reward. Maybe notwithstanding the rise in yields, most traders still think NIRP is on the way. We'll find out soon enough, I guess.
Re my positions: Although my UVXY position is down around 25% at the moment, I'd still rather hold Vix, than be long equities or cash. With the upside in Vix near infinity, and the downside limited with lingering uncertainty, Vix is by far my favorite play right now. Call me crazy...
*I am/ we are currently holding positions in UVXY, HUV, HQD, QID.
this is what i call a great post, the guy above me with his intro as (No son) is gay af. besides that thanks for the information as it's well used! following
Hedge_Of_The_World
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@BuyDipsSellTips, LOL. Thanks buddy. Should be an interesting day, 10Y yield is on a tear, and if we hit 1.50% I have to believe we finally get our correction.
stealthy1234
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Can we not respond to trolls? Honestly, giving them oxygen is a waste of time. Some people do not understand discourse and have no character.
Hedge_Of_The_World
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@stealthy1234, Very well said. You're absolutely right.
poister198
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Expecting some gap fills towards the broad upward channel towards 386!
Buy the dippers are still going strong with more firepower in their arsenal
Hedge_Of_The_World
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@poister198, Well said buddy! We looked strong this morning on the bounce, but Vix is lurking, and we appear to be losing steam. Could be in for another leg lower.
poister198
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@Hedge_Of_The_World, whelps seems i was wrong, could do more correction this time.
Still tuned in to your blog!