As VIX Spikes, Trump Says ‘Sorry’, Not Sorry

The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!

That’s how Donald Trump kicked off Monday following an overnight meltdown in global markets catalyzed by his late-weekend trade escalation.

Or, actually, that’s not true. The timestamp on that tweet is 7:08. Prior to that, he unleashed a pair of characteristically ridiculous “NO COLLUSION” rant-lets, which appear to underscore the notion that the president might be taking out some of his lingering Mueller probe frustrations on Beijing, to the detriment of global stability.

Whatever the case, markets are reeling. The VIX jumped above 18, rising the most in seven months on a percentage basis, and the most since December on net.

“For all of the recent market consternation about the VIX futures positioning (net spec short still outsized by the net ETN long, as the leveraged short ETNs are essentially extinct which is what matters the most), one thing we can all agree on is that systematic VIX roll-down players are certainly ‘back-in’ the trade post the Fed’s dovish pivot”, Nomura’s Charlie McElligott wrote Monday, adding that “as this morning we see UXA curve invert powerfully again, it will critical to watch how reactive or dynamic these strategies are at unwinding.”

(Bloomberg, Nomura)

“It will likely take a few days of inversion / higher realized for these trades to fully ‘vomit’ their ‘short vol’ positioning”, he goes on to write.

Additionally, Charlie notes that “from the looks of the trade in US Eq futures last night, there clearly was dynamic hedging going-through by active / discretionary funds as confirmed by conversations I had with clients”. You’ll recall that he weighed in quickly on Sunday evening as things started to unravel.

Read more: This Is Either ‘Epic Poker-Playing Or A Raging Miscalculation’

So, where are the dip-buyers? Well, McElligott goes on to muse that “there is that source of TWAP / VWAP –type selling which has muted any-and-all attempted bounces thus far”. He attributes that to the possible/partial reduction and monetization of the ‘Asset Manager Long’ accumulation he mentioned on Sunday.

(Nomura)

Finally, here are some quick tweaks/updates to Charlie’s CTA triggers and gamma flip levels:

  • Also as mentioned in last night’s note, we have now UPDATED our estimated CTA de-leveraging levels of note for US Eq futures today with small adjustments: ~2883 in SPX; ~7550 in NDX; and ~1572 in RTY—a break and close below would see the price signal move from the current “+100%” down to just “+57%” and trigger reduction of the current “Long”
  • Same reiteration of SPX / SPY consolidated & QQQ Gamma—Gamma flips “negative” at 2893.4 in SPX, while QQQ Gamma turns at 186.608
  • From a Delta perspective, SPX / SPY Delta will ‘flip’ at 2879.05, where for QQQ Delta will turn negative at 184.769

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2 thoughts on “As VIX Spikes, Trump Says ‘Sorry’, Not Sorry

  1. Whenever he was feeling challenged by the Party, or constipated, or when the mood struck, Mao would threaten to go back to the hills – an oblique reference to the Long March and a threat to engage in a guerilla war to overthrow the government. This would terrify and cow the Communist Party and Mao would get his way.

    This Administration is the most corporate friendly since at least Coolidge, and even as much as Trump has staked his political reputation on the stock market, I think these keystroke market gyrations stoke his narcissistic ego and is his way of showing his ass AND trying to get what he wants.

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