Micro Data:

So SPX contract numbers are boring.  With the short week and early expiration of OpEx, the number of contracts on SPX are not giving us a lot of feedback, except that there are very few hedges between us and 4400 for support, so if we get selling at the open we can expect downward pressure.

Since we do not have a lot of options expiring this Friday we probably won’t see anything out of the norm, expect the dip into expiration and maybe a bounce back next week.  However, CPI numbers are expected to come in HOT and they’re the first real data points from 2022, all the other ones were essentially looking at 2021 data.

Gamma is really high and negative in SPY and QQQ, so those are actually the more important instruments to watch than SPX and NDX.  Because the Gamma is so negative any move to the downside will force Brokers to start hedging by shorting Futures.

“China’s lockdown is going to have massive ripples in supply chain and value chain dynamics.”

Macro Data Points:

China’s lockdown is going to have massive ripples in supply chain and value chain dynamics.  China has also been a significant buyer of US Debt, and they’ve saved the US Economy many times over, but the ‘Chinese Firemen’ are NOT going to be available to prop up the US Dollar or the economy if they continue to a credit crisis, coal shortages, covid shut downs, and food shortages.  

War in Ukraine has killed wheat planting season in Ukraine and Russia, which as huge suppliers to move of the developing world.  Wheat and Commodities shortages is what started the Arab Spring 10 years ago, and we’re seeing a LOT of the same dynamics on the ground now in Egypt, Tunisia and other African countries that do not produce their own wheat or rice, which is their substantive ‘calories’.  

Russia is one of the largest suppliers of Nickle, which is a necessary component for the EV space, if Russian Nickel gets embargoed EV suppliers will start to face heavy pressures when current availability slows, or prices get so hot they can’t be priced into new EV car models.

Japan’s Central Bank is the Boy with his Finger in the Dyke, if Japan does not continue to control Japanese bond yields reaction in Japan will be fast, and the rest of the bond markets will see severe reactions.

Morning Update – APRIL 11, 2022

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