Tomorrow is ECB. Expectations are pretty high from equity guys. Bonds are much less optimistic. Given Fed meeting is less of an event (weak U.S. Macro data likely removed Sept hike from the table), tomorrow's ECB is very important. BOJ is not until end of the month.

It is incredible how equities diverged from macro this month. CBs meetings drive price discovery and all market does is re-positioning for CB meetings. In the meantime, economic growth is deteriorating as monetary stimulus is failing to spur growth and inflation. I don't think CBs are ready to give up, hence bond yields are not going to rise and lower growth will have to get priced in equities.


Sent from my iPhone

>

Market was relieved by weak NFP but it was a wrong reaction. The market should be worried about weak private payrolls. We have service ISM on 6th which would also most likely disappoint.

I see probability of hike at 30% for September with weak economic data and can't really get excited about risk. The probability should be zero like it was back in June post Brexit. Now I want to be short and defensive. Fed would likely try to talk  up hike damaging risk further, ECB would likely disappoint, and Kuroda would be a clown on 4th. I think this market is too dangerous to be long especially high beta but maybe this is why those who are long would get rewarded.
  I am upset about calling weak job report correctly  and not making much money on the right call because of fake reaction today. Why did curve steepen? Ridiculous.Momentum factor only gained 0.17% today also because Oil was up for some stupid reason (Putin opened his mouth). Anyways next week will be fun. Hopefully roller coaster.


Sent from my iPho

>

Also just added $PAY as a potential breakout.

Just saw Chinese PMI beat. Not good for risk. Tomorrow US ISM is the biggest data point at 7am PST.


Sent from my iPhone

>

Oil and USD are working. Bond yields also fell since Friday. However bid for equities remains strong. Equities are diverging from macro: reinforces my short risk recommendation. NFP this Friday will be huge! Last chance to sell before we get the most important data point for Fed. If NFP prints above 220k jobs, I expect a hike in September. While U.S can stomach another hike, can the rest of the world with Oil still below 50 and deflation? I think we are going to see some fireworks soon.



Sent from my iPhone

>

Yeah $SPY is down only slightly and $QQQ actually is positive while defensive sector $XLU is down over 2%. It looks like people are actually rotating out of defensive into risk. Tech Trader meanwhile taking a lot off the table on both sides and getting more neutral, now about 67% long by 25% short (33% cash), with technology remaining the biggest exposure at 25%.

I am expecting risk off next week. I am disappointed today with weak risk off reaction but next week would be ugly. "Bloody Monday"...


Sent from my iPhone

>

Doesn't seem like much risk-off at all today. Defensive sectors like $XLU and $XLP are actually selling off hardest while everything else is holding up.

Surprised TT hasn't bought into financials?

Yes  you are right. I expected Fed to be dovish but they came out hawkish, which caused repositioning and created this illusion of 'risk on'. High beta out performed low beta by 0.9% today and Momentum lost 0.35%. This is good for today but worse for next few weeks. I think we get a massive reversal and you want to own Utes and Staples. I am amazed how oil held up relative to USD move. It might be up for geopolitical reasons or it a fake reaction. Let's see on Monday. Next week will be interesting. I stayed defensive and even added. Good luck


Sent from my iPhone

>

By the way look at EWZ and EEM. I was short since last week, as well as XBI. These are early signs of risk off. I am short IWM too which is flat since I shorted it but it does look weak and ready to break down soon. It is just my opinion.


Sent from my iPhone

>

I recommend to be neutral or short Oil and energy stocks. Next Friday is NFP, which is expected to be strong, and if it is strong they could hike. USD would likely rally next week (normally the case after hawkish Fed) and Oil inventories in US are now turning up. Chinese demand is likely going to weaken since they are consuming less and exporting more. Geopolitical risk (Yemen threat for Saudi oil) keeps oil up which means it is overvalued relative to fundamentals.

Sent from my iPhone

>

Typical risk off reaction before Yellen develops as expected. I expect it gets more ugly.


Sent from my iPhone

>

Risk off is playing out so far. EWZ is leading the pack lower. IWM is holding for its life but I see pockets of risk giving up.
TLT is nicely rebounding.


Sent from my iPhone

>

Equities are still pro-risk. Cyclical rotation continues despite weakness in Oil. I think most people are short indices while not many are short individual equities. This should end badly.


Sent from my iPhone

>

Thanks Stefan.  Never pulled yhe trigger.


From my Android phone on T-Mobile. The first nationwide 4G network.

---

Thanks Stefan, yeah might be a good time for a trade.


From my Android phone on T-Mobile. The first nationwide 4G network.

---

Good job TT! It is a tough month for hedge funds.

I remain bearish for next week. My favorite shorts are IWM and EWZ. Expect a delayed risk off reaction next week. My favorite style is Price Momentum now. Its volatility fell 50% over past few weeks. We just need oil down and it works out. European banks are pulling back, Energy stocks sold off today, and bond yields are rising.





Sent from my iPhone

>

Many ETFs already up sharply since TT's call. $XLU now up almost 1% after starting down this morning.

I have positioned defensively on Monday. xLU would work for next 5-10 days. I am negative on IWM.


Sent from my iPhone

>

More bottom picking, this time in $FE (utility/energy) based on options call activity for October.

FE 10/21/2016 34x Calls, 11050@$0.8
MV: $0.9M | $Not.: $14.9M | OI: 5121 | 18.5% TotalOI
21.6% StockVolume | 95.8% OptionVolume

Also added $HAIN as another potential breakout.

$YELP up an additional 5% after hours coincidentally.

Do you see any big put spread trades in XLP over past few weeks? Thanks!

Sent from my iPhone

>

None that we can see are notable.