624Independent Macro/Vol/Crypto/Quant/Fintech Nerd
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SPX pushed passed the zero gex level around 3860 at close today. When SPX is below that (estimated) zero gamma level, volatility tends to increase as market makers are forced to buy/ sell directionally with the market in order to protect their deltas. All eyes on yields. Could get choppy around here if things stay the course. What do you guys think?
Few other vol charts I was watching today
I posted a few days ago about the 0.75 level being important... Now we're sitting right there. What might this mean for equities?
"The 5-year note leading the rout is a warning signal that the rates selloff is going beyond a repricing towards a convexity move. This is something which we think is inconsistent with Fed dovish rhetoric on rates.” - Peter Chatwell, Mizuho International
It's no secret Google trends data has a habit of correlating to the price of bitcoin. Here are a few recent charts I put together. Could this be a derivative of Metcalfe's law at play?
I've been tracking this for a few years now. I always found the price correlated a bit better with the search phrase "Blockchain".
Any search phrases you guys would like to see?
Michael Burry recently tweeted (then deleted) that the markets were dancing on a knifes edge with increasing margin debt. I thought I'd add some context to his thesis with some charts.
In particular, I believe Burry was referring to the chart above, which shows margin debt year-over-year percent change vs SPX. When margin debt YoY% breaks above 60%, it does appear to line up with the tops in 2000, 2008, and the 17% drawdown we saw in 2010.
This data just updated a few days ago for January, so it appears we're not quite at a level of concern yet, but as the next chart shows, that might depend on the Feds balance sheet.
The basic thesis behind the relationship with the balance sheet and margin debt is something like this. The fed increases the balance sheet and gives money to the banks. Banks loan that cash out to hedge funds/ institutions as (cheap) margin. Hedge funds/ institutions buy stocks with increased leverage and markets go to the moon.
So if the balance sheet continues to grow, we could see margin debt break that 60% level in the near future.
Just as a bonus chart, margin debt and the CAPE ratio also tend to have a close relationship.
Just sharing this for entertainment purposes... But interesting nonetheless. What do you guys think? Are we in for a repeat of 2020?
This breakout of the 5 year Treasury yield is worth keeping an eye on. Consensus seems to point to 0.75 as the level to watch. Could a near-term break above there trigger a more hawkish attitude from the Fed?
Nothing ground breaking here... But BTC tends to get a bit choppy whenever stochastics get overheated and start to trend back down. Im still long BTC and see this dip as a buying opportunity.