Nomura’s McElligott Warns: ‘We’re Nearing Gamma Flip Risk In SPX’
Dry kindling, meet struck match.
Dry kindling, meet struck match.
“Expectations are extremely volatile”.
And passive investing plays a role.
How dramatic would the unwind be?
It’s now just a matter whether the bubble merely deflates, or actually bursts in earnest.
That FOMO feeling again.
“Monitoring conditions”…
…that is the question.
What could go wrong?
Hint: The Fed is the largest source of demand.
“This would drive mechanical selling flows from what has been one of the largest ‘gross $ exposure’ positions in the model all year”.
A sustained rotation requires an improvement in the data, the bank warns.
“In our view, the significant drop in rates market liquidity is not temporary”.
Daisy chains, knock-ons and seasonals amid the macro melee.
“The ‘partial’ trade deal story was floated into the ether last week” to an underwhelming market “meh”.
You can thank margin pressure and slowing global growth.
“Price movements over this summer once again clearly emphasized the spot/gamma/realized vol dynamics”.
“Classic ‘stability breeding instability'”.
We’ve got a ways to go yet, based on historical correlation anyway.
“The triggers in the short run could be geopolitical”.
“Markets dominated by computers have different characteristics than those run by people”.
“…the current consensus / ‘Momentum’ positioning construct is a pure reflection of the ‘Duration Trade'”.
“Trade talk, political campaigning and tweets have contributed to volatility, from China to Fed policy
Don’t forget, “there is no pot of gold at the end of a rainbow”.
…but it’s still madness.
The performance gap for August ranks in the 7th %ile since 1982.
Peering through the haze towards Jackson Hole.
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