Preamble
Welcome to my weekly market note where I explore what has my attention in markets and share all that’s happening in my trading systems. I am often looking for (and will highlight) notable shifts, extremes, and divergences that catch my eye. I’ve found these can be the whispers that precede the market making an overt statement.
There’s a glossary at the bottom of the note that clarifies some of my terminology. I also host chats about each market note and trade updates in which paid subscribers can follow up with questions and comments. Use the link below to join those chats.
For those of you who want more, I share my daily read of markets and volatility on X @vixedsignals and in Substack Notes. All of that content is free.
Lastly, please read the Disclaimer at the bottom of this note. It’s important.
With that said, let’s get after it…
I am privileged to be able to spend my days watching squiggles on a computer screen while writing about markets. I gained this privilege by simple virtue of having been born in the United States in the late 20th century, not from individual sacrifice or merit. It’s not lost on me that writing about freedom without having ever had to fight to secure it is also an incredible privilege, and it’s one I don’t take lightly. Thank you to those who have sacrificed to secure these privileges for me and so many others.
Performance Snapshot
More details are provided in the K.I.S.S. section
2025 Portfolio P&L: +6.4%
2025 S&P 500 Return: -2.8%
2025 Portfolio over/underperformance: +9.2%
The Bird’s Eye
View from ahigh
Equities, bonds (most of the Treasury curve), and the U.S. Dollar all closed the week lower despite strong action on Monday in the face of the Moody’s downgrade from the Friday before. Things looked OK until Wednesday when, after the morning’s May VIX futures expiration, a 20-Year bond auction didn’t go well. This kicked off a downturn in stocks and bonds, which snapped VOLs awake and kept downward pressure on the Dollar.
Trump’s Friday morning tariff aggression towards the E.U. and AAPL 0.00%↑ handed bears another gift. After a reactive spike, VOLs sank throughout the session ahead of the long weekend while equities reversed higher led by the small caps. That’s right, I said the small caps. Go figure. Fixed income markets also rallied early, although they closed well off their highs. There was no rally to be seen in the Dollar, and it ended the week at the lows.
If there was one shining asset class, it was the Metals where we saw Gold, Copper, and Platinum glitter (sorry).
So, yeah, not a great week for many portfolios, including mine. Eyes are fixed on Capitol Hill where we await updates on the budget. Eyes are also fixed on darting between Trump’s social media account, tariff and trade headlines, geopolitics, and conflicts, both existing and potential, throughout the world. Oh, and interest rates, which many are worried are about to break markets. This is fun!
The Market’s Mouth
Straight from the source
If you’ve been reading these notes over the past few weeks/months, a good deal has been written about the imbalanced positioning in the currency markets. My portfolio has had a good amount of direct and indirect exposure to these markets, with mostly bumps and bruises to show for it.
Speculators in currency futures have been positioned long, in some cases excessively, in most of the major cross-currencies while holding a large short position in U.S. Dollar futures. Buying the Yen and Swiss Franc in times of market stress is to be expected, and the rest of the buying appears to be linked to the narrative that U.S. “exceptionalism” is over and we have too much debt so sell U.S. assets.
To be clear, lopsided positioning on its own is not a reason to put on a trade; I had good technical setups in the losing trades I’ve had on, and taking the losses is the cost of doing business. And even though I won’t be buying any of the cross-currencies that Speculators are already very long, the market is clearly telling us that the positioning isn’t everything right now and shorting these currencies for the time being is a mistake.
Under the Hood
Volatility, Correlations, & Dispersion
Wednesday morning concluded the May options expiration cycle as the May VIX futures contract went to futures heaven, shifting the June contract into the front month (M1) position. June’s first day as M1 was a rocky one (Wednesday) when that 20-Year auction led to a rates spike and equity selloff. The day closed with VIX
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