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Morning Notes — Positioning


March 10, 2022

SPX: We see the SPX tracing out a bottom in the 4,100-4,300 as realized volatility cools. The CBOE Volatility Index (VIX) is off recent highs of 36.45 to 30.90 today, but levels below 20 are probably required before a meaningful recovery can take place.  Once that happens, the SPX will have a chance to get through technical resistance in the ~4,600 area, with levels just above acting as a bullish trigger for systematic funds.  The NDX should lift, but continue underperforming during this economic cycle.

NDX: The NASDAQ 100 (NDX) is underperforming today after an inline CPI print and into an unknown Fed policy outcome.  Today’s more hawkish ECB meeting puts upward pressure on DM nominal yields, while inflation breakeven yields rise at a slower pace. The combination has 10-year real yields moving back and through resistance levels now at -0.90.  As discussed many times, Tech multiples (particularly the most expensive multiples) and real yields have a strong negative correlation.

SVX: Since the correction began on January 4, the S&P 500 Value Index (SVX) has outperformed the S&P 500 (SPX) and NDX by 475bps and 971bps respectively. Again, it’s important to identify relative strength in down markets, because these sectors, industries and stocks will outperform during a recovery.

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