Hey everyone,

 

Goodness, what a long week. Where were we? Ah yes.

 

SPY: "Buy the dip, sell the rip."

TLT: "Buy bonds!"

 

Candidly, our attempt to buy more of the S&P 500 dip yesterday didn't work out too well, and we're kind of relying on today to fix that.

Of course, we have reason to believe that the forecast is still going to be pointing up, because Robot Jim's step-forward from yesterday said so. And he was right, of course.

A median 1-week forecasted gain of 1.6% is pretty hefty. Without some overriding reason, it seems smart to have some exposure to that.

As has been the case all week, however, there's a "sell the rip" pattern in Jim's step-forward analysis, which tells us that if you get something like a 2.00% gain today, you shouldn't expect such a sanguine forecast going forward.

 

That seems reasonable. We'll happily sell our E-minis if SPX gets to 5850 today.

Once again, the 0DTE map is mostly netted out. There's quite a disturbance right above the Momentum band—a strong bu short-living buying pattern. This could encourage a rally off of the 5810 level. It doesn't look like it will be that robust, though.

 

So we're long E-minis. Not in a big way, but with an obligatory position. The one important thing we'll do today is transition that position to a call. VIX has a 23 handle. IVs are pretty low relative to the last couple weeks' action. Let's take advantage of that. Something as simple as an ATM call expiring next week will turn our un-limited risk position into a limited risk position and offer us cheap upside convexity.

 

Lastly: Bonds!

 

Nothing has changed in bond-land. There was some net long delta in TLT yesterday, but not enough to concern us. The call-buyers haven't returned. This gives us hope that we can ride the bond train to bond heaven.

 

Talk Sunday!

 

The SqueezeMetrics Team