VIX - VJH / Financials / Bonds / Velocity / Scope / Scale
Good Morning - Hope this finds everyone well.
The Virtual Jackson Hole Symposium begins a 3 day affair today.
_______________________________________________________________________
Bonds
Macro Data includes Preliminary GDP and Unemployment Claims @ 8:30AM EST.
Economic Calendar - https://www.investing.com/economic-calendar/
Bonds out the Curve 10Yr (ZN) - 20Yr (TLT) - 30Yr (ZB) have been pulling back. As we indicated in prior
commentary, the ROC (Rate of Change) is seeing increasing Velocity ahead of VJH.
The 10Yr is the weakest Instrument.
Volatility in Bonds, we anticipate will begin to Increase.
Bonds have been the Deposit of Choice, regardless of Real Returns - the Return of
Capital as opposed to the return on Capital - this speak volumes as to what is coming.
An assured loss in Bonds is axiomatic as Inflation remains well above Real Returns
adjusted well beyond the CPI/PII inaccuracy.
_______________________________________________________________________
Financials
Traditionally, Financials respond well to Positive Rate Adjustments.
In prior Macro Observations, we Indicated some time ago, Banks were no longer lending. We began to
Observe Banks reducing Lines of Credit (LOCs) and Revolving Credit.
Reverse Repurchase Agreements began a change in Term Structure early in 2021, with longer
dated terms out to 48 Days, some further duration.
As Economic activity is grinding down, Banks were exposed to increased Deposits.
Liabilities, which they began to shun, driving increases in Money Markets, which have become
Bloated. This is reminiscent of when the Dollar Broke Par during the 2006-2008 Financial Crisis.
This one event spooked the Markets, it set off a large Panic. It was not until Janet Yellen and
Timothy Geithner arranged for $2 Trillion in Short Dated Treasuries to be authorized, did the
DX crisis abate.
The Dollar is being hoarded as Fear continues to compound. It is the Senior and Reserve Currency
and during crisis, remains the preferred Position.
The thinking is simple - Why give the Government my Money as it is assured a loss, the Debt can
never be paid back.
It can be paid back synthetically - a Tomato would be $1,400.00.
_______________________________________________________________________
Volatility
Events - Important Events to Market Participants, speed up Market Activity.
It expands the Scope and Scale of participation, while having a large and profound effect
upon the speed of Trading Activity.
Prices become extreme in Intra-Day actions.
Yesterday, we observed a large Bid under the Front Month M1 @ the 19.00 level. Protection
was being Bid there.
During Globex, we saw 18.95 trade, a one tick dip below, this is quite typical as the VX
always trades a one Tick move above or below when it is staging.
And it is... the Falling Wedge on the Daily has provided 7 Months of Wash Rinse Repeat declines
programmed to perfection.
The larger Daily Targets for the VIX M1 extend to the 12s.
The problem is, they haven't traded below 16...
All eyes should be on Volatility as it begins to pick up.
As many of you know we have a large VX Position - VXX, VX Curve, VXM, we will continue to
build this position into September.
We anticipated a Break of Trend for the Globex Tuesday night session. It failed to materialize
as Distribution is incomplete, but very close to ending.
Last night's GLOBEX Session was a clue, we saw indecision.
We are watching the VIX M1 Front Month @ 10:00AM EST for 19.65 as the level to indicate the
VIX Curve will be breaking up and out.
To be clear, this is NOT the Cash/Spot VIX - the Instrument is the Front Month Futures Contract.
________________________________________________________________________________
Our Position Sells are weighted heavily in TECH and VOLATILITY.
We anticipate at least an 11% Correction form the most recent ATHs.
It is developing, albeit slowly... this is about to change IMHO.
BE well, Happy Hunting.
- HK
_______________________________________________________________________
The Virtual Jackson Hole Symposium begins a 3 day affair today.
_______________________________________________________________________
Bonds
Macro Data includes Preliminary GDP and Unemployment Claims @ 8:30AM EST.
Economic Calendar - https://www.investing.com/economic-calendar/
Bonds out the Curve 10Yr (ZN) - 20Yr (TLT) - 30Yr (ZB) have been pulling back. As we indicated in prior
commentary, the ROC (Rate of Change) is seeing increasing Velocity ahead of VJH.
The 10Yr is the weakest Instrument.
Volatility in Bonds, we anticipate will begin to Increase.
Bonds have been the Deposit of Choice, regardless of Real Returns - the Return of
Capital as opposed to the return on Capital - this speak volumes as to what is coming.
An assured loss in Bonds is axiomatic as Inflation remains well above Real Returns
adjusted well beyond the CPI/PII inaccuracy.
_______________________________________________________________________
Financials
Traditionally, Financials respond well to Positive Rate Adjustments.
In prior Macro Observations, we Indicated some time ago, Banks were no longer lending. We began to
Observe Banks reducing Lines of Credit (LOCs) and Revolving Credit.
Reverse Repurchase Agreements began a change in Term Structure early in 2021, with longer
dated terms out to 48 Days, some further duration.
As Economic activity is grinding down, Banks were exposed to increased Deposits.
Liabilities, which they began to shun, driving increases in Money Markets, which have become
Bloated. This is reminiscent of when the Dollar Broke Par during the 2006-2008 Financial Crisis.
This one event spooked the Markets, it set off a large Panic. It was not until Janet Yellen and
Timothy Geithner arranged for $2 Trillion in Short Dated Treasuries to be authorized, did the
DX crisis abate.
The Dollar is being hoarded as Fear continues to compound. It is the Senior and Reserve Currency
and during crisis, remains the preferred Position.
The thinking is simple - Why give the Government my Money as it is assured a loss, the Debt can
never be paid back.
It can be paid back synthetically - a Tomato would be $1,400.00.
_______________________________________________________________________
Volatility
Events - Important Events to Market Participants, speed up Market Activity.
It expands the Scope and Scale of participation, while having a large and profound effect
upon the speed of Trading Activity.
Prices become extreme in Intra-Day actions.
Yesterday, we observed a large Bid under the Front Month M1 @ the 19.00 level. Protection
was being Bid there.
During Globex, we saw 18.95 trade, a one tick dip below, this is quite typical as the VX
always trades a one Tick move above or below when it is staging.
And it is... the Falling Wedge on the Daily has provided 7 Months of Wash Rinse Repeat declines
programmed to perfection.
The larger Daily Targets for the VIX M1 extend to the 12s.
The problem is, they haven't traded below 16...
All eyes should be on Volatility as it begins to pick up.
As many of you know we have a large VX Position - VXX, VX Curve, VXM, we will continue to
build this position into September.
We anticipated a Break of Trend for the Globex Tuesday night session. It failed to materialize
as Distribution is incomplete, but very close to ending.
Last night's GLOBEX Session was a clue, we saw indecision.
We are watching the VIX M1 Front Month @ 10:00AM EST for 19.65 as the level to indicate the
VIX Curve will be breaking up and out.
To be clear, this is NOT the Cash/Spot VIX - the Instrument is the Front Month Futures Contract.
________________________________________________________________________________
Our Position Sells are weighted heavily in TECH and VOLATILITY.
We anticipate at least an 11% Correction form the most recent ATHs.
It is developing, albeit slowly... this is about to change IMHO.
BE well, Happy Hunting.
- HK
_______________________________________________________________________