Fight or Flight.
Updated
TLT is the most interesting instrument for me to analyze.
That's what has me concerned about the upcoming CPI.
You know when you are flying a plane and the instruments all start flashing and making noises.
That's what is happening the past week in equities, bonds and FX.
Trends are THE most important factor in a traders arsenal.
TLT trend follows liquidity. If liquidity is rising (TLT UP), risk is on, if liquidity is drying up (order book getting thin), risk moves to off conditions.
TLT and S&P 500 Dealer Directional Open Interest (DDOI) gamma exposure is another measurement of liquidity.
Liquidity over the past week has been under tight control and pulling back in cases like TLT.
While we are seeing big distributions intraday in equities from short squeezes and earnings hit or misses, I'm not reading that in liquidity.
It could be the fact that all 3 hedged equity funds are positive and support along with long call flows that reminisce in 2020-21 Bull Market.
Underlying weaknesses may be lurking post CPI.
If TLT breaks this trend line lower (< 103), it will likely be the earliest indicator that liquidity is drying up.
TLT on a positive uptrend meant positive flows in indexes.
The trifecta, Bonds, S&P and Hedge Equity Flows all supportive flows.
It's the primary reason I was bullish at the the following point.
DXY is another important trend to follow.
If US wants to export inflation, it would start with a trend reversal higher.
I expect DXY will come back down to test the 20D prior to CPI (FEB 14).
That's when I think when the fireworks will begin, maybe a LEFT tail and maybe a RIGHT
I missed the last CPI print in my series on Has It Peaked.
This idea and the Window of Weakness idea are just primers for what is shaping up to be an explosive few weeks ahead
VIX is acting different these past few weeks. I think we are at a Nadir on the VIX and this CPI print right in front of VIXperation/OPEX is when we'll know Higher for Longer or Viva la'Bull
FEB 14 - CPI
FEB 15 - VIXPERATION
FEB 18 - OPEX
FEB 20 - Exchange Holiday
So lots of potential for Volatility.
Vol should be well supplied into CPI
and depending on direction and how dealers are positioned for VIX/OPEX should see larger distributions than normal.
Good if you're a convexity trader.
FEB 20 Holiday is important because it's happening during a window of weakness while technical flows will be weakest until March.
That's what has me concerned about the upcoming CPI.
You know when you are flying a plane and the instruments all start flashing and making noises.
That's what is happening the past week in equities, bonds and FX.
Trends are THE most important factor in a traders arsenal.
TLT trend follows liquidity. If liquidity is rising (TLT UP), risk is on, if liquidity is drying up (order book getting thin), risk moves to off conditions.
TLT and S&P 500 Dealer Directional Open Interest (DDOI) gamma exposure is another measurement of liquidity.
Liquidity over the past week has been under tight control and pulling back in cases like TLT.
While we are seeing big distributions intraday in equities from short squeezes and earnings hit or misses, I'm not reading that in liquidity.
It could be the fact that all 3 hedged equity funds are positive and support along with long call flows that reminisce in 2020-21 Bull Market.
Underlying weaknesses may be lurking post CPI.
If TLT breaks this trend line lower (< 103), it will likely be the earliest indicator that liquidity is drying up.
TLT on a positive uptrend meant positive flows in indexes.
The trifecta, Bonds, S&P and Hedge Equity Flows all supportive flows.
It's the primary reason I was bullish at the the following point.
DXY is another important trend to follow.
If US wants to export inflation, it would start with a trend reversal higher.
I expect DXY will come back down to test the 20D prior to CPI (FEB 14).
That's when I think when the fireworks will begin, maybe a LEFT tail and maybe a RIGHT
I missed the last CPI print in my series on Has It Peaked.
This idea and the Window of Weakness idea are just primers for what is shaping up to be an explosive few weeks ahead
VIX is acting different these past few weeks. I think we are at a Nadir on the VIX and this CPI print right in front of VIXperation/OPEX is when we'll know Higher for Longer or Viva la'Bull
FEB 14 - CPI
FEB 15 - VIXPERATION
FEB 18 - OPEX
FEB 20 - Exchange Holiday
So lots of potential for Volatility.
Vol should be well supplied into CPI
and depending on direction and how dealers are positioned for VIX/OPEX should see larger distributions than normal.
Good if you're a convexity trader.
FEB 20 Holiday is important because it's happening during a window of weakness while technical flows will be weakest until March.
Note
Strong demand in 10Y auction shiftsNote
DXY running for cover at the 20D until CPI. Precisely On Schedule.
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