Dollar Versus Stimulus

With another ‘stimulus’ bill inching its way through Congress the Dollar has taken yet another tumble while 10-year treasury yields jumped 0.81% in anticipation. I’m just thinking out loud here but wouldn’t it be more honest to simply call it the ‘Big Tech Pump Up’ bill and then to transfer the money directly into Amazon’s corporate account. Just the other day I was talking about shorting big tech if Trump gets his 2nd term but now I am not so sure anymore.

Case in point: my ‘monsters of tech’ composite symbol which jumped quite a bit overnight. The current formation is starting to look pretty bullish and a breach > 13000 puts the reigns back into the hands of the bulls.

Again this composite is of my own creation and your mileage may vary. However the five symbols I used (FB, MSFT, AAPL, GOOGL, AMZN) are closely correlated, so you can easily track them separately and define respective thresholds.

Meanwhile the DXY is starting to look very troublesome and – after meditating on this subject – I don’t think that neither a 2nd Trump term nor a Biden presidency would be good news for the old greenback. Maybe I should start charging subscriptions in Yuan or Euros.

10-year treasuries (inverse to the yields) are falling and are currently at their lower expected move threshold. Implied volatility here has been scraping the bottom of the barrel since the COVID-19 epidemic began but are now starting to pick up steam again.

However that said – I don’t see a strong trend either way here unless we clear either the 140 or 137 mark. If nothing else treasuries currently look less bearish than the Dollar. On the other hand – they are denominated in Dollars and although won’t see the loss in purchase power you’ll feel it next time you’re at the pump, at the grocery store, making bills, ordering online, etc.

The VIX was tickling the 30 mark but then pulled back a little. No worries I’m sure we’ll see that one pop > 35 before Santa starts making his rounds. Assuming of course he’ll bother to show up this year and doesn’t just decide to get wasted along with his elves.

Otherwise I don’t have too much else to offer today. We are heading into a strange pre-election period now which will be rife with drama and last minute gotchas and surprises. The market knows it and remains on its toes.

No matter what happens I think it’s safe to say that nothing that happens on Nov. 3rd and thereafter will be good for either the Dollar or treasuries. All that’s different is how exactly freshly minted coin will be funneled and who’ll get rich in the process. Same game different day.

I better stop it here as I’m starting to sound like a communist. However you know me well enough that I have a few of my own irons in the fire. Join here as a member if you want to stay ahead of the curve and benefit by leveraging all that juicy volatility heading our way.

 

  • Mike
  • last year

About the Author

Hey there, I am one of the founding members of Red Pill Quants. I used to work as a systems engineer in Silicon Valley until I left the industry in 2008 to become a full time quant trader. It's been fun ever since.