eirikb007

eirikb007

I want to point out two things in this post: 1. The elevated implied volatility before earnings on blue chips stocks is per se a risk factor due to high call open interest and the following reduction in implied volatility post earnings. 2. The SKEW index is signaling increasing tail risk. The first point: As I’ve pointed out in recent posts, high open...

eirikb007

I want to discuss why I use the trend in the VIX index as an indicator for downside risk. When the VIX is trending higher, I interpret that as increasing downside risk for stocks. My reasoning is as follows. I use the VIX Index as an indicator for real put demand. I say real demand, because traders buying and selling intraday is not what I’m looking for....

eirikb007

The US dollar correlates positively to US Treasuries. Market participants needs US dollar when buying US Treasuries as investments or as collateral. Now we see a pretty sharp diverence and break of that correlation. One would anticiapte a return to mean of this relationship. My base-case is that the dollar will follow bonds and get bid up. In short, my...

eirikb007

TA: TLT consolidating within a rising wedge. Upside target 172 at prior highs. Fundamentals/macro: Bonds have been positive correlated to a rising stock market lately. One would anticipate bonds to continue to get bid up even if stocks sells off due to high demand for liquid assets and collateral during market turmoil. Qualitative: COVID-19 cases are rising....

eirikb007

TA: POWR is making higher lows and retracing higher of fib zones. Fundamentals: Market cap $40M. POWR is a peer-to-peer energy exchange platform. It aims the consumer select their source of power. Qualitative: The "the green shift" is on everybodys lips. Public companies get bid up as money managers search for green investments. Younger generations are...

eirikb007

"Inflation is always and everywhere a monetary phenomen", MIlton Friedman said in 1975. Inflation is the long-bond investor's worst enemy because the principal of the bond is fixed, causing investors to demand higher yields (higher coupon payments) when inflation is high. If inflation is coming, long-dated bond yields will RISE, which is the same to say that...

eirikb007

Chart is indexed with: S&P500 ~0% YTD NASDAQ ~25% YTD FANG+ ~66% YTD FANG+ stocks have been the primary driver of the larger stock indicies, while the S&P500 is dogging it in comparison. Coming into monthly option expiry (OPEX) on Friday 7/17, there is a record high call option open interest in the FANG+ stocks. From an option perspective, which is the...

eirikb007

Fed has now let its balance sheet drop more than $450 billion since May, yet the US dollar (DXY) has been falling ever since. During the market crash in February and March, the Fed expanded its balance sheet by a record $1.65 trillion - the dollar was still bid up massively. Long term yields have stayed at record lows, and even get bid up. Sure the Fed has...

eirikb007

A measure of the Ted-spread using LIBOR based Eurodollar futures and 3 month US treasury bill rate. Higher Ted-spread signals stress in the interbank market (shadow-market), and is not a healthy sign with regards to liquidty.