Tue Oct 25
Buy or sell?? I continue to dislike equities (long term) but the little bounce underway could grow legs. The buyback blackout ends shortly. Could be $5 Billion a day in buybacks until year-end. No shortage of cash on the sidelines. Nov/Dec are seasonally strong months. SPX took out 3812 ( an estimated CTA buy level). But the real long side hot sauce is that rumors are swirling regarding a Treasury Twist program. That’s the Treasury mind you and not the Fed. Twist involves bonds but could ignite stocks in a big way. Did I mention the Nov elections? A near-term Treasury operation seems mighty plausible. Even Barrons is talking about the great opportunity to go long at this point. So OTM calls are a cheap way to play.
The party spoiler narrative is that the Fed is unlikely to pivot, pause, or anything else. Watch the 2yr Tnote yield minus Fed Funds. That needs to invert for a Fed policy change (IMO). Even the 10yr Tnote minus 3mo Tbills is still positive. So pull out your lawn chairs and some popcorn. Treasury vs. Fed… Should be interesting.
Good trading!
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