A few thoughts on the market this week

Hello everyone, thank you for your patience in waiting for part two of the corporate bond primer. I am also working on a biotech primer that include a special guest so stay on the lookout for that. While I finish up those longer form pieces I still wanted to share some of my thoughts on this Tuesday’s CPI print along with some market data.

In regards to the CPI as I am sure you are aware we had a rather hot print as care as the market was concerned. Below is the data.

U.S CPI (MOM) (JAN) ACTUAL: 0.3% VS 0.3% PREVIOUS; EST 0.2%

U.S CORE CPI (MOM) (JAN) ACTUAL: 0.4% VS 0.3% PREVIOUS; EST 0.3%

U.S CPI (YOY) (JAN) ACTUAL: 3.1% VS 3.4% PREVIOUS; EST 2.9%

U.S CORE CPI (YOY) (JAN) ACTUAL: 3.9% VS 3.9% PREVIOUS; EST 3.7%

Figure 1

As Figure 1 illustrates the equity market dumped a sizeable amount while the US 10Y yield skyrocketing. With both assets returning to more reasonable pricing by EOD. When looking at the core CPI print it is easy to understand why market participants got worried. (Figure 2) While January CPI data can be skewed due to the holidays this print is something to keep in mind while setting up macro bets.

Figure 2 via Celeritas Capital (Green line= MoM annualized, blue line= 3mo Change annualized, yellow line= 6mo Change annualized

Current Positioning :

Another key factor to be aware of is volatility especially as Friday the 16th is OPEX. (Figure 3)

Figure 3 via Convex Value, Vol. Skew

Figure 4 via GammaLabs, SPX CTA Positioning as of 2/13/24

Figure 5 via GammaLab, expected flow

Figure 6 via GammaLabs, 1-month IV vs RV (notice the sharp jump in IV)

Overall I think this CPI print will mostly keep the market in a choppy setup for a while. As always thank you for reading and feel free to leave any comments in the comment section.

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DISCLAIMER: We are not Financial Advisors, and all information presented is for educational purposes ONLY. Financial markets can be highly volatile, so good risk management is a must.