Stock market experiences a short-term increase, with record-high trading of 0DTE options😌

In equities, with 0-day (0DTE) call-put ratios hitting YTD lows in August as markets were struggling with the move higher in real yields, the setup was ripe for a short-squeeze as the US main indices jumped between 1.5-2% on the day, with a basket of the the 'most shorted' stocks rallying by double that amount. Moreover, day traders and short-term expressions continue to be in vogue as 0DTE options have made up 50% of total volumes over the past month, hitting a historical high based on sell-side data. Expect markets to continue to see further outsized intraday moves into NFP, CPI, and the Sep FOMC as a hallmark of the current 'data dependent' narrative.

#StockMarket #equity #NFP #CPI #FOMC

Summer Markets: Embracing High Risk Sentiment and Preparing for Potential VIX Rebound🧐

While the markets continue to work through these slow summer months with risk sentiment back to local highs, a quick reminder that equity VIX seasonality has tended to trough during these months, only to rebound aggressively from the latter half of August into November. Obviously correlation is not casuation, and past performance is no indication of the future, but something to keep in the back of mind as we enjoy the rest of the summer months.

#markets #Risks #VIX #equity

US stocks reenact the nightmare of 2022, risk-off sentiment spreads😢

With US stocks selling off another 1% yesterday, the correlated sell-offs in equites and fixed income have brought back uncomfortable memories of 2022, where risk-parity and classic 60/40 funds suffered one of their worst performances on records. August is shaping up to be the worst month for these conventional strategies YTD, and PNL-management has no doubt been contributing to the wider risk-off move over the past 2 weeks.

From a technical perspective, while we have turned negative since a couple of weeks ago on the technical break in Nasdaq, short-term indicators look somewhat overdone for the SPX, and the risk-reward looks more balanced here, especially considering the consensus and pervasive bearishness in China already. It might make sense to keep risks light and close to home while we wait for more markets to settle down from here.

#stocks #equity #ytd #SPX #NASDAQ

Global stock markets are facing a dual challenge😲

While Chinese equities sold off on continued pessimism over local activity, US equities similarly faltered as higher rates are starting to give stock investors concerns again, especially considering that the gap between 10y real rates (inflation-adjusted) and SPX 12-month forward PE multiple remains wide. SPX futures touched a one-month low yesterday with regional banks (-3%) and energy (-2%) particularly hard hit. Technically speaking, futures should support around the 4450 level, especially with the bearish China sentiment feeling a bit overdone in the interim; however, the longer-term move will likely depend on where longer-term bond yields go from here, and whether we'll have another 'taper-tantrum' special in the fall as a more ominous development.

#stock #SPX #bank #bond #equity

Important Economic Data to be Released Soon, Market Trends Stable🙃

Outside of China, markets were quiet with the UK out on Bank Holidays on Monday, with US markets following suit next Monday on Labour Day. Markets saw markets holding their continuation patterns after Jackson Hole, with US equities rallying 0.5-1%, and bond yields softening about 3bp across the curve as the double header of 2yr and 5yr auctions came in as market expected.

Despite a number of top-tier data releases on the horizon, namely with JOLTS / PCE / ISM / NFP, Friday's 10y future straddle is coming in on the soft-side at just over 54 ticks vs a 68 tick average for this year's NFP weeks (source: Citi), signaling a lot of comfort over the rate market's current pricing (20% chance for a Fed hike). Furthermore, the 2yr bond at over a 5% coupon is the first time that has happened since 2006, no doubt drawing some initial buying interests and it's been a long time since savings accounts have seen these yields.

#market #JacksonHole #equity #NFP #bond

PPI surges, but what's next for US bonds?😳

Unlike the ambiguity out of the CPI, Friday's PPI number came in clearly hotter than expected, where both headline and core numbers rose 0.3% MoM, the strongest prints since the year started. The headline YoY rate rose to 0.8% YoY vs 0.2% YoY last month, and the PCE-related components all came in higher than expected, such as airfares.

On the other hand, consumer sentiment came in relatively lukewarm, with weaknesses seen in the expectations component and an easing in the forward inflation expectations. However, treasuries were unable to sustain a bid despite the somewhat friendly data and yet another early sell-off in equity markets, with yields rising by 5-7bp across the curve throughout the entire session. Similar to the warnings we pointed out in equities, chart patterns on fixed income look relatively ominous as well, with 10y yields broken out from its YTD channel to the upside, with the local highs of 4.25% just a stone's throw away as the next obvious target.

#PPI #PCE #inflation #equity #bond

China Implements Multiple Measures to Revive the Market, but Stock Market Shows Weak Rebound😳

Over the weekend, China announced a slew of market supportive measures, including a cut in stamp duty on stock trades and curbs on major shareholder sales in hopes to revive one of the worst-performing equity market performances YTD. However, disappointments over a lack of more forceful measures on the economy, as well as substantial selling from foreigners compressed the CSI 300 rally from 5.5% at the open down to just 1.2%. Equity outflows were persistent throughout the day, and the ChiNext exchange saw the largest intraday drop (-5.6%) in over 2 years. The main CSI index has only seen such a large pullback on 3 prior occasions since 2004, two of which during the GFC and one during the popping of the A-share bubble. However, across all those occasions, the market has managed to pull off small rebounds on both a 5-day and 30-day basis, and hopefully we'll see a similar positive outcome out of yesterday's move in the weeks ahead.

#China #StockMarket #equity #YTD #CSI300

Equities might continue to come under pressure🥲

If the recent correlation of the SPX with the yield curve continues, then equities might continue to come under pressure in the weeks ahead if we continue to see a bear-steepening of the yield curve ahead. We continue to favor a more defensive/negative view on risk assets into the fall, which has historically been a challenging period for risk assets in years past.

#equity #SPX #Curve #risk #fall