Inverted Risk-On/Off Unwind Update

in last weekend’s Inverted Risk-On/Risk-Off Update we said, The coming week also sees the quarterly expiration and with both equity and bond markets at critical junctures there could be some unexpected volatility and thus serious pain for this inverted risk trade especially if $SPX can break above 1375…   and if the market likes to cause the most pain to the most people..   this is it

With last week’s bond market massacre as stocks closed out one of their best weeks since the Dec lows this inverted risk trade unwind is indeed causing some serious pain.  We believe one of the biggest mistakes being made by the street analysts and the pundits is assuming the market’s risk appetite has been accelerating when in reality the speculative community has been de-risking.

Chart: Bloomberg

Last week’s CFTC COT report showed continued selling down of $FV_F longs while covering $ES_F shorts as both markets saw intense pressure against both of these positions.  Until these guys can get their positions more balanced we believe the market will continue to cause the most pain to the most people and force them flat.  As the specs exit these losers they will no doubt turn their attention to the next big trade which appears to be in the long end of the curve as short positions in $US_F & $TY_F saw material increases week over week…


About exantefactor

capital market veteran of over 15 years covering multiple asset classes. Focused on analyzying markets ex ante (before the event).
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