highlights

MTUM cuts both ways

How far can we extend?

November 7, 2025

A classic from McSweeney’s

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Current Views

Short AUDNZD @ 1.1494
Stop loss 1.1611 Take profit 1.1311

Correcting

The market is trying to figure out whether Sam Altman is more like Elon Musk/Alex Karp or more like Sam Bankman-Fried/Elizabeth Holmes. The market is rejecting the “big deal signed” headlines. The market was pure momentum and now the momentum is gone.

If you own some portion of the $7T of cash on the sidelines, the 24000/24200 area in NDX looks like the buy zone to me, which implies we could have another 1000 points of downside before this is all over.

In theory, we could have a relief rally if the government shutdown ends, or on a simple endogenous reversal / short squeeze, but that’s not my view. Retail has been gorging on stock for months and sentiment is sour. The OpenAI commentary about government subsidies for funding has added another layer of concern as the $1.2T in commitments backed by $20B of revenue is finally under the microscope after Sam Altman’s Jeff Skilling-esque response to a legitimate question.

The entire world needs that $1.1T in spending to be real, because AI is the procyclical scaffolding that holds up the k-shaped economy via the GDP boost from capex and the wealth effect. ChatGPT will likely evolve into another e-commerce / search engine site like Google with sponsored links and pay-to-play outputs as the rubber hits the road on the need to somehow monetize sooner rather than later.

https://shellypalmer.com/2025/08/chatgpts-ad-dilemma-when-700-million-users-arent-enough/

MTUM through the bottom of the daily cloud is a potential harbinger of a bigger extension lower for stocks, particularly the highest-valued and least profitable and most popular retail and most short names.

FX

I cannot remember a more desolate week ahead calendar than this one:

Oof.

While there has been a ton of activity in precious metals and equities in the last few months, FX and bond markets have been moribund and themeless. I do, however, detect a bit of a turn in the JPY as sentiment and positioning got short JPY and the market has finally capitulated on the short USD trade. A spanky move back to 150.50 is probably on the cards now as vol rises a bit, USD longs and JPY shorts unwind, and equities continue lower. I must say it’s very hard to explain the movements in USDJPY these days as it responds to yields here and there but mostly ignores them. With so few explanatory variables, I’m more inclined to trade off positioning and technicals and those both point south now for the first time in ages. The good news / bad price after ISM at 154.00 is probably a tell, and I expect another leg lower soon. Also note that Takaichi dropped some dovish fiscal commentary last night, USDJPY tried to rally, and could not.

149.00/40 is the mega support as that’s now the daily cloud, the top of the Takaichi Gap, and the low on October 20. The top of the cloud is 150.40 so that’s a closer target. 1-week 152.00 USDJPY puts for 17bps or so off 153.30 spot look nice to me. 1-week vol is lower today than it was yesterday, which could end up as a nice scoop. Or, you could simply sell USDJPY here (153.00) with a stop at 154.56. Not a ton of leverage there, though, so I prefer the USDJPY put.

I like the USDJPY put, but I admit there isn’t much macro meat on the bone, so I’m not going to put it in the sidebar.

Meanwhile, as we bemoan the fall in FX volatility, a nice reverse indicator just dropped. Tim Power notes that Bloomberg BusinessWeek was super excited about currency trading in February 2025 and the headlines now describe this as the worst year since 2005. The truth, as they say, is in the middle. The chart is FX vol (CVIX) with the two stories marked.