Gradually…then suddenly.

NASDAQ’s relative fear is huge

The VXN vs VIX gap we have been pointing out over past sessions continues to get wider and wider. Second chart shows the VXN/VIX ratio and the recent explosion. Do you think tech can be priced with this much relative fear and the rest of the market trades calmly? We do not think so and despite VIX not being dirty cheap, it offers interesting set ups should the tech fear spill over. Last chart shows the Feb 19/23 call spread as one simple way to play it.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv

QQQ short gamma becoming a “problem”

It is at least becoming a problem for people that still believe in calm grinding higher tech. QQQ is trading deeper into negative gamma land where dealers hedging needs will destabilize markets further.

Source: Tier1Alpha

NASDAQ realizing (some of) the rates move

Time for the updated NASDAQ vs US 10 year (inv) chart. 1.7% is the level in the US 10 year. A close above it and things will get even more “dynamic”.

Source: Refinitiv

NASDAQ “fear” realizing bond “fear”

On Monday we pointed out: “If tech is the rates sensitive play…” Anyway, surging bond volatility is now being “discovered” by late tech vol traders. The problem is that despite the VXN move, the gap vs MOVE remains huge…

Source: Refinitiv

US 10 year – 1.7% the only thing that matters

Triple top or will we eventually break above the huge 1.7% level? This remains as one of the more important charts out there…

Source: Refinitiv

Sectors and correlation with yields

Let’s see if the most recent move in rates has more legs. Sector correlations and real yields.

Source: JPM

The big question for Q1

DB writes: “How quickly the Fed decides to unwind it will have a big bearing on how financial conditions tighten. A rapid QE unwind would be worse for long-end bonds, EM and equities and potentially slow down the hiking cycle. A very slow unwind would keep long-end yields contained but require more interest rate hikes, in turn with a bigger impact on the USD. Yellen said quantitative tightening would be like “watching paint dry” in the last cycle. Chair Powell indicated that things could be very different now and that a decision is likely this quarter. The balance sheet, not lift-off, is the big question waiting for an answer in Q1.” One of the implications to think about is, how will VIX react…?

Source: Refinitiv

Bitcoin – is that a huge head and shoulders breaking down?

Bitcoin is well below the 200 day moving average. Note the break below the neckline of the huge HS formation. Two days ago we reminded our readers about cheap BTC hedges (here): “Bitcoin downside hedges haven’t been this cheap in a long time. Implied vols have moved sharply lower across maturities. Add to it the rising skew and puts are cheap for anyone who needs to hedge long bitcoins…” BTC vol is surging today and skew is coming off hard. Hopefully you put on some hedges/speculative downside trades…

Source: Refinitiv

Source: Genesisvolatility

Always watch that (p/l) downside

Many people missed the risk and p/l management “class” last year, but it is never too late to learn about the first risk to watch, your downside (in p/l). We will explore this area in great detail later this year, but with many darlings moving against the crowd you should refresh your memory of why draw downs suck…

Source: TME

Source: TME

Via https://www.zerohedge.com/the-market-ear/drawdowns