Yo, Pit Crazies,
Was yesterday a pivotal bounce off the bottom?
Could be, as the Bank of England blinked so that might – just might – be a signal that the Fed will slow down the rate hikes somewhat.
Maybe!
Stocks were up and the VIX was down, and that is a good thing for bulls.
Let’s see what the flow was doing.
U-G-L-Y
The ugly chart below is the iShares iBoxx $ Investment Grade Bond index ETF (Ticker; LQD)
Folks holding BBB-rated debt have had an amazing 25% cut in the value of the ETF this year.
There has already been a massive repricing of risk and rates.
Six-month chart of LQD with one-day candles.
Now look at the flow below.
Customers are closing some 100 and 110 strike puts and have concentrated positions in the 90-level puts.
As brutal as the down move has been in bonds, at least one customer does not think it is over yet and likely has rolled gains for a free shot lower.
Mark and I will keep tabs on this in Big Money Flow.
We have watched LQD put volume for months and this smart money has been right.
Will 90 be the end for LQD?
Stay tuned.
The Rundown
Big Money Flow
Mark closed out the (Ticker: CANO) calls for 69% in a down market. The flow does not care which way the market blows.
Power Gains, Capital Gains and Power Income Trader
I am tagging these three items, beecause this is an old bond guys market and Bill is our resident bond guy. Frank and I helped a little.
– Power Income Trader closed Powershares Dollar Index (Ticker: UUP) Oct. 7 31/30 pv for an 8% gain.
– Capitol Gains Proshares Ultrashort SPX Ticker: SPXU/ (US Oil Trust Ticker:USO) combo for a 21% gain.
– Power Gains Newmont Mining Corp (Ticker: NEM) Nov. strangle for a 28% gain.
To Your Trading Success,
AG