Positioning does not match expected event risk
highlights
People are long USD but expect dovish Warsh hmm
Current Views
Short CADJPY @ 115.30
Stop loss 116.61 Take profit TBD
Long USDCAD @ 1.3833
Stop loss 1.3744 Take profit 1.3944
Survey says
Thank you to everyone who responded to the survey. 467 respondents makes for an excellent sample. The most interesting takeaway here is that the market is paid rates and long USD but strongly expecting a dovish tone from Warsh at the June 17 FOMC meeting. This means that the runup trade into FOMC is likely to be sell USD, buy bonds. The first question asked about Warsh’s tone…
Then, the median dot. A large majority of respondents expects the median dot to go from one cut to no change.
There are still some people looking for a Fed cut this year, which is mildly interesting.
This distribution of USD positioning matches our weekly positioning indicator and fits with common sense observation.
And the skew in rates makes sense, too.
Nonfarm payrolls
I don’t have too much to say about jobs. The U.S. economy is strong. A textbook breakout in 10-year yields on the hourly chart as it takes out the hourly cloud and the 200-hour moving averages (simple and EMA).
Crypto
The cryptocurrency universe has lost half its market cap in eight months. The crypto DAT stupidity and new worries about whether or not Saylor has any plan to pay back MSTR’s monster debt load are pushing the digital coins lower.
This is not so much a sentiment story as a flow story. The same guys that were buying BTC at $100,000 and ETH at $3,500 are now selling.
The death spiral / contagion theory is in full force and we may start to see some true craziness in STRD, STRF, STRK, and STRC as the market prices in the fact that the mechanics behind the MSTR Rube Goldberg machine look a little bit like the mechanics behind LUNA.
Even PURR is trading weak over the past 48 hours. Yuck.
Stocks
The S&P rebalance candidates will be announced tonight. MRVL is a top candidate for addition, though oddly they are not included in the Kalshi betting odds.
https://kalshi.com/markets/kxsp500addq/companies-added-to-sp500-/kxsp500addq-26jul01
And going into the SpaceX IPO next week, how about this crazy table from Keith Lerner. These moves are calculated from the closing price on the day of the IPO (not the IPO price itself). Max drawdown is the most bearish way to look at this stuff, but still. In this new era of IPOs by mature (overpriced?) companies, the risk is even greater than it used to be.
Here’s Aswath Damoradan’s most up to date take on SPCX.
Never underestimate the power of an Elon Musk stock, of course! Congratulations to S&P for having a spine, something few U.S. institutions possess in the year 2026.
Calendar
CPI the highlight next week with BoC and ECB also on tap. Two controversial AI story stocks (ORCL and ADBE) release earnings mid-week. Please note that I am in Monday then out for nine days on a family trip woohoo.
Final Thoughts
- Reminder: The war isn’t over.
- A 2021 speech where Waller specifically warns about the type of cherry-picking Warsh is guilty of.
https://www.federalreserve.gov/newsevents/speech/waller20211019a.htm Via GM via NickT
“The moral of this little example is that one must be careful when selectively ignoring data series—be it used car prices, food and energy prices, or household surveys of inflation expectations. All of these series convey important information about the evolution of inflation, and one should exhibit caution in dismissing data as outliers. We must keep our eyes open to inflationary pressures, wherever they come from, with consistency and rigor and stand ready to adjust policy if such a change is warranted.”
- Check out my new article on Panoptica: I want it. But I don’t like it.
https://www.panoptica.com/i-want-it-but-i-dont-like-it/
Happy birthday, Dad!!!!! Have a legit weekend.
