All the charts and data we refer to can be found on the Yacht Club page.
Hey everyone,
It's time!
Yesterday in SPX, we thought the forecast looked good, particularly with respect to the "buy the dip" situation. It made sense to buy the dip (and sell the rip).
We did buy the dip. It only turned out only OK. What a wild ride, though.
More importantly, all this wild price-action in SPX did not come with an attendant rally in bonds (despite their recent strong anti-correlation). TLT is now down over a percent on the week. This is what we were hoping and waiting for—the overwhelming number of bought calls in TLT held bonds down at a critical moment.
We've made the point many times in the last few days that just about all the "get long bonds" boxes have been checked except for TLT option flows.
Yesterday's flows were short delta—bought puts and sold calls. That is bullish. That is the reversal of the recent long-delta (call) flows that had us sitting on our hands. That means that there was, indeed, a measure of capitulation in TLT yesterday as the people who'd bought TLT calls and sold TLT puts got frustrated as TLT fell while SPX got pummelled.
This is it, folks! We are getting long bonds! We will be holding long bond futures as of early this morning. It is the trade we have been waiting for since 2022. Today is the day!
Dealer short positions in Ultras and ZB are high enough to predict gains. TLT option flows have capitulated and are short delta. Oil and commodities are trending down meaningfully (look at oil this morning!). And to boot, bonds are already trending up. All of this is great for bonds.
What about stocks?
Well, Jim says it's bullish! And this looks like the kind of distribution that you can buy a call on in order to keep a fixed-risk bet on the table, so that's probably what we'll do from here.
As before, the pattern is buy-dip-sell-rip, so if you get a 2.00% SPX gain today, you may want to pocket it and walk away.
And then in terms of 0DTE positioning...
...it looks like there's not much going on, except for a fleeting bullish impulse around 5825 that should carry SPX ten or twenty points higher—but no more than that. A pretty open playing field again, like yesterday!
Long SPX calls. Long bond futures.
The SqueezeMetrics Team
