Morning Update

Macro Update: Food riots are starting, Sri Lanka is already facing serious unrest, Pakistan and Iran are looking to be next. Instability in Iran would compound the energy supply issues we’re already facing.

Commodities deals are bypassing the US Dollar, trading commodity for commodity.  

Italy has decided to reject the EU sanctions and they will buy Russian gas with the Ruble.

Preliminary May PmI comes out Tuesday and PCI Friday; the numbers might be a bit ‘feel good’ which could cause some market bullishness, so be cautious.

May 24 (this is an answer to a question from Dorothea)

I’m personally of the opinion Xi Jinping won’t invade Taiwan for a million reasons; China is not prepared to fight a war without a land connection, and Taiwan has been preparing for this potential for 75 years, unlike Ukraine, and China’s economy can not bifurcate from the wider Western world like Russia did in their anticipation for war.

However, when people reference the VIX as a fear indicator, it would give the impression it is measuring activity in the wider market, but that’s not really the mathematics of it. The VIX is a measure of how much the S&P is moving based on a standard deviation model. And, the movements of the S&P is driven by contract positioning and market maker flows.

It was just to demonstrate that a LOT of the “easy language” we use to make markets or trading feel accessible is often just wrong, and so it makes it more difficult for people to position themselves well or be patient for the overarching move to take place.

Morning Update – May 20, 2022

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