...remember that tomorrow's expiration will play some mind games with today's tape.
Dressed myself in green, I went down unto the sea.
Try to see what's goin' down, try to read between the lines.
I had a feelin' I was fallin', fallin', fallin',
I turned around to see,
Good morning and welcome back to the slippery track. The ursine arrived in force yesterday and cut up the rug at a Red Dye soiree. While Boo has been keenly aware of the big picture dynamic, the CPI served as a validation, of sorts, and alotta traders got caught leaning the long way in anticipation of fresh acne. Those seeds were planted at last week's FOMC--which we've discussed--but yesterday's fray was the vaunted third dip. And after three and a half years of self-fulfilling Snappers, alotta folks are a tad anxious as we power up for a fresh set of flickering ticks.
We know the dynamic--we've got the dollar on one side, asset classes on the other and here we are, stuck in the middle with you. The genesis of the short-side try (in the metals) last week was the notion that Boom Boom would have a hawk on his shoulder. He did, and as the greenback rallied, a collective pffft! was heard in the city of critters. Small caps, metals, financials, transports, fixed income, schnitzel,
The question, of course, is what now? Last night, while Succo dined with my Queen and I, we discussed the global landscape, risk premiums, liquidity, perception, misinformation, our softball rubber match and a number of other things. I told him, as I told you, that I dipped my wick in some metal and energy exposure late yesterday through defined risk calls. "I wanna be long these two groups against my short financials," I told him, "and yes, John, I know that if liquidity leaks out of the system, they won't be immune to an inevitable swoon." We also discussed the dollar which, if it continues to trace out reverse dandruff, would likely put the kibosh on my latest schnitzel attempt.
So, which is it? Will we see a strong dollar and the attendant weakness in asset classes? Or will the dollar devalue and allow the seeds of hyper-inflation to sow? My sense is that we toggle between the two as the FOMC tries to identify that path of least resistance (from foreign holders of our debt). There's little doubt in my mind that Boom Boom would prefer to let the dollar dribble lower--and I think it ultimately does--but it's gonna be a tug-o-war and a battle to the end. From a trading perspective, this will provide some snazzy opportunities to flip flop and serve up some gains. I will only ask ye faithful to remain conscious of the two-sided risks and respect the potential for increased volatility (via trading smaller sizes or widening your levels).
And so it is, another day is set to begin. A quick peek up Cripple Creek finds Europe edging slightly higher, Asia in a house of pain, the metals tetherballin' the flat line and the dollar of seven clicks. Pre-market futes are up nicely but we should expect some downside probage given the recent slippage. You know how I'm positioned--I've got no secrets from ye faithful--but that certainly doesn't mean that I'll be right. We'll figure it out on the Buzz and, alas, that's where I'm heading now. Hit 'em hard Minyans, and remember that tomorrow's expiration will play some mind games with today's tape. We saw a massive unwind of an NDX put spread (pressuring the downside yesterday) and I "think" that most of that trade has been unwound and/or rolled.
Good luck today
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at email@example.com.
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