Grey Market

Quick note: I share these reviews because I write them for myself every morning anyway. I don’t mind sharing, but if they’re not shared or boosted, I’ll take it as a sign they’re not useful to most. I put countless hours into building my models and macro insights, so if they don’t add value on X, I’ll focus my time elsewhere. As my friend (and soon-to-be partner in crime 😉) @Jimmyjude13 says, "Give a crackhead crack, and what do you think they'll do?" That’s what’s happening with stocks today. Stock indices aren’t macro assets—they move to their own beat. The Carny Quant model is max long on high-risk beta and has been for just over a week. It was a few days early, took a minor drawdown, but the dip buy has paid off. With ES and RTY at a 9 rating and NQ only at a 6, there's still room for upside. A favorite Carny saying, Friends don't let friends short all-time highs! Bonds are moving as expected after the FED's politically driven 50 bps cut. The fear of inflation is back in focus, as it should be. We're on the verge of one of the largest refinancing and homebuying sprees on record (percentage change-wise). I wouldn't touch anything long out the curve. The trade has been short 10 years and out, and if you’re not already in, any significant rally in those bonds should be sold. The SOFR curve is interesting, as H5 and M5 have another 50 bps cut priced in. We suggest shorting anything in the whites or reds on rallies that price in above those extra cuts. With the FED's recent move, the dollar has lost its shine. While I wouldn't short it outright today, dip-buying is off the table for now. The EUR is nearing recent highs but was aggressively sold yesterday on the ramp higher. Europe isn't in a position for a strengthening currency given its economic backdrop relative to the dollar, but the FED’s politically driven decision has created uncertainty. For now, it’s clear that inflation remains a major issue, and trust in the FED’s nonpartisan approach has taken a hit. A tricky situation has emerged, and we recommend avoiding trades in EURUSD, USDJPY, and other pairs until a clearer macro picture develops. Oil has become more interesting again. While global growth remains weak and China grapples with how to stimulate its balance sheet recession, the FED’s move has put dip-buying back on the table. There’s always debate over whether oil and commodities are true inflation hedges or contributors to inflation. However, when oil is extended to the downside and inflation fears re-emerge, mechanical dip-buying pressure tends to follow. If you see a significant sell-off that recovers key levels, oil becomes an outright buy. We've been long Natgas, but as usual with the "widow maker," we took profits quickly and no longer find it as attractive as we did before. Gold and BTC are great to own if you already have positions. I wouldn't establish new positions in either right now, but the overall backdrop is positive, and both could be bought on major sell-offs. I currently have no positions in either, except for a memory stick running Tails hidden in my closet. In summary, stocks are still holding strong as my Carny Quant model remains max long on high-risk beta. Bonds are extended after the FED's move, and any significant rally in long durations should be sold. The SOFR curve still has additional cuts priced in, offering a clear opportunity for shorts. While the dollar has lost some shine, avoid trading it for now until a clearer macro picture emerges. Oil is showing signs of renewed interest after the FED’s move, and although we took profits in Natgas, it’s worth watching for opportunities. Gold and BTC remain solid holdings but aren't appealing for new entries at the moment. Good luck and God bless!

Quick note: Please like and share if you find this useful. It helps the algo and others see it. Thank you. China has finally acknowledged its balance sheet recession and rolled out a "major" stimulus plan. While the gesture is more significant than the initial numbers, it signals a willingness to take further action. However, fiscal measures will need to ramp up considerably. In a balance sheet recession, unlike a credit one, lowering interest rates or adjusting credit measures doesn’t incentivize companies to borrow or spend. The core issue isn't credit access but that companies are overloaded with debt. Lowering rates or easing lending standards won’t help when businesses are using all their cash flow to service existing debt. If they can’t manage their current obligations, cheaper loans won’t fix the problem. The private sector is focused on reducing debt, not taking on more, so government spending and direct fiscal measures are necessary to kick-start growth. While long-term growth prospects under communism typically lead to eventual failure, this stimulus opens a window for China’s government intervention to drive asset prices and economic growth in the short to medium term. We wouldn't fade this trend, as it’s likely to impact asset prices and growth potential across struggling global economies. The bigger focus is how this will impact the markets we trade. U.S. stock indices remain strong, with the FED put evolving into a YOLO stimulus approach at all-time highs. However, opening new positions in the current market isn’t advisable. We’re still holding high-risk beta in the quant portfolio, but we’ll soon transition to a more balanced all-weather portfolio as asset spreads begin to recover from their overstretched levels. Bonds will be impacted by China’s stimulus plan, reinforcing our previous strategy. With the FED decisions behind us and their openness to more 50 bps cuts, there’s no reason to hold anything beyond 2-year durations. These cuts, combined with a recovering China and stabilizing EU economies, could trigger a significant inflation surge that the FED didn’t anticipate. While no one expects another post-COVID inflation spike, an extra point of inflation could push levels past 4%, causing fear and frustration for consumers and policymakers alike. We’ve been shorting 10-year and longer durations, and will continue to do so on any significant rallies. The dollar remains tough to trade, given mixed global economic reactions. There's no reason to favor EU economies over the U.S., but the China stimulus, combined with animal spirits, could push the dollar lower. Both EURUSD and USDJPY are difficult to trade with reasonable stops, so it's best to avoid them until the picture becomes clearer. Oil continues to struggle, with rallies losing momentum due to weak global growth. However, buying dips above $71.50 remains valid, especially with China’s stimulus providing a tailwind. Oil will likely remain range-bound between $68 and $80, but buying at the lower end and trimming at the upper end offers a solid risk/reward setup. If China rolls out a larger fiscal plan, oil could become a long-term buy. Natgas is extended, and while it may bounce, the easy money has been made. No need to chase here. Gold and BTC remain solid dip-buy candidates, but there’s little reason to jump in unless panic selling occurs, which seems unlikely in the current environment. Summary: China’s stimulus plan has opened a window for short- to medium-term asset growth, but fiscal measures will need to ramp up. U.S. stock indices remain strong, but new positions aren't advised at current levels. Bonds, particularly beyond 2-year durations, should be shorted on any pops, as inflation risks rise with China’s recovery and further FED cuts. The dollar is tough to trade for now, with too many mixed signals, and EURUSD and USDJPY should be avoided. Oil remains a buy at the lower end of the range, while Natgas no longer presents a favorable setup. Gold and BTC dips can be bought, but only on significant sell-offs. Good luck and God bless!