"Potential For Further Slop Remains" In Nasdaq After Op-Ex "Unclenching"

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"Potential For Further Slop Remains" In Nasdaq After Op-Ex "Unclenching"

To Nomura's Charlie McElligott, "another sloppy selloff in Global Rates," feels like UST 10Y running to 2.00 is the “right move” now with the US economy tracking ~6% in Q1.

And as such, the Cross-Asset Strategy MD warns that “Secular Growth” (bond proxy) Nasdaq is being commensurately repriced LOWER relative to peers with more “Cyclical Value” / economic-sensitivity

So let’s recap the drivers of this latest surge:

  • USTs bear-steepening after the predicted Fed “greenlight,” regardless of the median ’23 Dot location, because JaPo simply stayed on message about not tightening ahead of meeting the Employment and Inflation mandates—check

  • And as in parallel with the bear-steepening, more of the same US Equities thematic “Cyclical Value over Secular Growth” we expected (Nomura Cyclical Value Factor +0.6% yday and now +31.1% YTD, versus Nomura Growth Factor +0.1% yday and -6.5% YTD)—check

  • In the meantime as we await Friday’s Op-Ex, $4.9B of Dealer (Long) Gamma in SPX at 3350 holding us tight like a rubber-band—check

Looking-forward and as discussed in recent days, a monster $9.2B $Gamma sits up at 4000 (with a lumpy $4.2B remaining after $4.9B rolls-off front week) which feels like a “round number” inevitability in conjunction with a bullish seasonal for April / May and Spring economic reopening green-shoots for sentiment, so I’ll keep pounding the table on scooping Equities upside into any temporary post Op-Ex Gamma unclench & Delta de-risk lower, particularly if it comes in conjunction with a Rates mini-tantrum that is occuring now.

Thing is, QQQ / Nasdaq looks very different still from SPX, with QQQ Gamma vs Spot remaining “Short” alongside -$1.5B...

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