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Summary: Bonds remain in a major compression regime. Our bias is for a breakdown lower, but short-term disinflationary trends likely keep things compressing for a while longer. The USD continues to hold its breakout level, but has so far failed to move much. The weight of evidence still supports a bullish breakout in SPX, with breadth broadening out. Though ...

This week’s episode examines the divergence between positive equity index momentum and building stress within underlying volatility and credit markets. I analyze recent behavior in the two market models, tracking how healthy mechanics coexist with historic extremes in implied correlation, sticky vol-of-vol, and early signs of credit stress.

Topics explored:...

Summary: Bonds remain in a major compression regime. Our bias is for a break lower.

Breadth continues to improve. Short-term sentiment and positioning are elevated and climbing, but not yet at levels that push us into defensive posturing. The longer-duration signals are a different story. The MO Liquidity Tool and BofA’s Bull/Bear indicator both po...

This week’s episode examines the divergence between the HRV and EWS models alongside a multi-year low in implied correlations. The discussion details the current volatility landscape, important correlations to watch, as well as shifting trends within credit markets.
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Summary: Bonds remain in a major compression regime. Our bias is for a breakdown lower, as we covered last week. But they’re short-term oversold, and positioning needs to lighten before the next leg down gets traction. Expect some reversion over the next few weeks. We’re looking to get long 2s and 10s on confirmed bullish advances.

The next two wee...