Is the Stock Market Bounce a Trap? Ilya Spivak Says This is Next

[00:00:00] Speaker 1: the markets are bouncing as we get into the striking distance for event risk coming up this week we're going to figure out if this bounce is something to be taken seriously or if the market are uh is just positioning for what is coming up ahead and getting even ahead of the news this is macro money i'm always be back head of global macro here at tasty live and we'll get right into the price action here first and foremost uh here's the s p 500 and you can see it's much the same playbook as what we saw last week which is of course exactly what we've been talking about really since friday we had last week uh this uh two days of bounce before the news uh after a big flush the preceding friday then of course the news got out of the way we got the earnings batch for last week out and released it didn't provide anything particularly controversial but it also didn't really move the needle further to buoy sentiment and so we get a flush it's a similar sort of thing perhaps this time we were looking for the first two days of this week before we get into the event risk to have something like this present itself and lo and behold but nevertheless we have a series of lower highs and lower lows and so the trend continues to point lower nothing much to change here seems like we're moving through this week as anticipated here is the nasdaq it's a similar story here we're back to retest the top side of this range as we did last week but again the thing we ultimately ended up with last week was a rejection and then a close through the recent bottoms now as we've said before there is a forest of support levels under here there's all kinds of reference levels for where this market could potentially find the bottom and indeed it found something here as we anticipated for the start of this week and we're bouncing but again lower highs lower lows so for now looks like this is a thing to continue to hold where things are legitimately different and of course when we hold what we're talking about our short positions we'll get into the specifics here at the end of the show as we always do when we run down the trades that we've got on but we're sitting here short uh through put verticals in both uh the uh spy etf for the smpa and the queues for the nasdaq where we had to uh take our ball and go home is in the russell now we've been short again through put verticals basically since this top here marked off with the break in the wake of jackson hole uh the symposium in wyoming where a hawkish chair warsh spooked this market into a down move that then ran from basically here end of august pretty much until now and so initially we ran this trade down it worked well got out right here as we started to test these levels when we broke back down got back short but that part of it clearly doesn't seem to be working we got a break slightly higher today so we're back to where the initial trade was bottomed out and i just got out here because this looks like it's turning now it does look like an attractive buying opportunity if you can find uh attractive risk reward but i haven't seen it yet the pricing doesn't seem to allow for it so for now something to watch but at least for this index we have a legitimate term or at least what could be one at least for now with maybe a correction through a test of some of these levels here around let's call it 2850 2875 into 2900 or so but for the nasdaq and the s p 500 the stand still continues it likewise is a day of correction for the precious metals we can see they're retesting former support termed resistance that's the story in gold it's the story in silver where we're just anchoring and waiting for the event risk to come through it's a little bit more of a correction for the us dollar which manages to find uh some support here against in particular the european currencies uh the euro here looking worse for the wear but again still within the bounds of the ranges and so uh happy to sit this out on the long side for now because it doesn't look like we've crossed any major lines it's a sizable pullback for the pound as well although again the big line in the sand remains untested the other expressions in particular against risk sentiment commodity currencies look a little bit better so the aussie is holding up here we're long this uh the canadian dollar is holding up decently although obviously there's a meaningful uh pullback here we're still above this level that we're looking at as the most recent stair step in this move higher so for now staying short the dollar uh still seems to make sense but uh so some of these currencies are starting to uh chafe at their recent strength and we're starting to see a bit of evidence that maybe we might go the other way it's all down to this event risk um crude oil here uh looking like it's trying to find a place we were looking for a opportunity to buy this maybe this is that opportunity for now the pricing is still a little bit fuzzy but this could be an interesting place to add to our long position um i haven't done that yet but looking at it very intently here and trying to see if there is a pricing structure that would work stay tuned for that we are also looking at bitcoin that is finally starting to show some signs of life here at the bottom of this range it pointedly held the low it's trying to bounce i'm still treating this as consolidation in a move higher so looking for the next jolt here to the top side as for now we continue to hold these critical barriers now needless to say all of this ultimately is likely to come down to what the event risk is going to look like so as we look at uh what we have on the docket here uh we've got all of the big hitters to look forward to we had a little bit of economic data that was out here today perhaps uh the most interesting of the bunch uh was uh the pop in consumer conference uh confidence uh here um from the conference board um that was something um interesting because of course we had a major major low but in the prior month uh this release told us that we saw a little bit of a pickup um it doesn't really look like there's uh too much of a change in the way that things are looking for the moment but at least perceptions of current uh conditions uh seem to have improved a little bit uh perhaps that is linked to uh the sense that maybe uh easing of retail gasoline prices from september to october was the deciding factor but consumer confidence still looks relatively downbeat on the whole so not really a game changer and we can see that in markets today the big news still pending so australian inflation will kick us off that'll be an important input into what the rba does next and we'll see if the markets pay attention frankly it does not seem terribly likely that the markets take a tremendous amount of time to deal with a pickup in australian inflation and what it might do for what the rba does next because of course on wednesday is the big day and even though in the morning we're going to have a policy announcement from the bank of canada the big story almost certainly looks like it'll be the fed policy announcement fed is expected to hold fire this time if we look at the uh probability matrix here aggregated from fed funds futures we can see 90.6 chance there's no hike this time but also a 90 chance that there is one in december uh it's a foregone conclusion by january but at 90 percent we're pretty well there there is a further hike that's fully discounted almost 98 almost 99 by march there is now more confidence versus yesterday in the possibility that there is then a second hike in 2027 looks like it's pretty much fully discounted by september 98.6 percent so the markets are a little bit more anchored into where sort of their position has been versus the fed the fed and the markets agree that there is a hike that's coming this year in addition to the one they've already done in september that's not controversial policy officials and the markets align on this the larger issue is what happens next policy officials think nothing happens we stand still in 2027 and in 2028 we start to gradually cut rates down the markets think as we can see here there's two more rate hikes next year march and september it looks like and the battle lines are essentially drawn now we just got an update from the atlanta fed gdp now growth model it gave us a still lower reading 3.4 percent that's the lowest yet for this third quarter projection we're going to get the numbers themselves on thursday the expectation is that we're going to get a 3.2 on that rate we still haven't come down all the way down there but of course the direction of the revisions has pointed firmly lower and that's sort of setting the stage for maybe the fed doesn't need as the markets have them hiking rates twice more next year maybe that's not necessary the other wild card of course is the earning season we still got four big names on the docket not surprisingly wednesday and thursday is when they hit to kind of inform this cadence that we've been watching on wednesday after the close we're going to get alphabet and microsoft on thursday after the close we're going to get amazon and intel so all of those of course bellwether those are the major names for this ai narrative and indeed we can see from the market breakdown today those are the names mainly driving this thing those are the big green bars here and if we look at the equal weighted we can see where the strength is it's in tech and its cousin in the ai boom at least the build out the industrials so we're seeing here um where the story is and kind of watching the markets even themselves out before this news flow it's the news flow that is likely to be uh the driver here perhaps not even for its contents but for removing event risk out of the way of markets so they can do their thing that was the story last week and because we are looking at an earnings season that is basically pacing right in line with expectations essentially 29 uh percent earnings growth for the s p 500 according to facts that's numbers as of last friday that's pretty much spot on right on the screws with uh expectations and so the markets seem to be saying well look it's a good story this ai thing but what have you done for me lately there's just not the kind of delta between realized results and expectations to really fuel speculative fervor and instead it seems to be inspiring some profit taking so if the fed is non-controversial ultimately it doesn't say much or do much and these earnings releases are going to be broadly in line with expectations as we've seen this season pace so far then we're probably looking at a situation where the markets again default to some sort of liquidation some sort of unraveling of risk exposure and that's what we're going to be watching for this week uh positioning wise still long gold short the dollar against the smattering of currencies um aussie pound euro canadian dollar long uh long uh short silver um and gold uh still nursing this long position in in ewz the brazilian etf which obviously had a rough ride this week but now seems to be finding a balance there's still plenty of time to go so i'm just going to let this story wash itself and wait long mexico through eww short europe through an fez put vertical uh still long bitcoin through an ibid call vertical short the nasdaq and the s p through put spreads long the bonds through call spreads they're digesting after a surge last week long oil through call spreads and a little bit short biotech through a put vertical in xbi and that's macro money for today we're here monday through thursday so we'll return tomorrow i'm writing for the news and insights portion of tastylab.com and commenting at ilia spivak on former twitter and on blue sky thanks very much for joining happy trading see you tomorrow