When Narratives & Positioning Align

Market Note :: May 11, 2025

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…

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Performance Snapshot

More details are provided in the K.I.S.S. section

2025 Portfolio P&L: +8.0%

S&P 500 Return: -5.2%

Portfolio over/underperformance: +13.2%

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The Bird’s Eye

View from ahigh

Energy markets were in the spotlight to start the week after weekend headlines about increases to OPEC+ production. A Sunday open gap down in oil didn’t stick, and the rest of Monday’s and Tuesday’s sessions were effectively holding patterns ahead of Wednesday’s FOMC.

Powell disappointed those looking for action by sticking to his recent script: early signs of an economic slowdown are not enough to induce an interest rate cut, but the Fed is watching the data closely. Inflation is moving in the right direction but tariffs have added a wrinkle that could disrupt inflation expectations. Patience, caution, and uncertainty were the words of the day.

Not to be outshone by Powell, Trump posted about easing chip restrictions near the end of the Wednesday session, which gave equities a nice boost. This optimism carried over into Thursday when a trade deal with the U.K. was announced as was the plan for U.S.-China trade negotiations to take place over the weekend.

Thursday wasn’t over yet, though. Trump told us to buy stocks again, and in what feels like an “I think you’re cute” gesture, China bought some Boeing planes. Stocks ripped, Bitcoin ripped, the Dollar ripped, and bonds were sold. That feels pretty “risk on” to me. After all of that, Friday’s boring session was not a surprise.

PSA: Don’t skip over the Futures Positioning section this week. Positioning in a handful of markets is telling a consistent story and possibly setting us up for some serious moves.

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The Market’s Mouth

Straight from the source

While facing consistently negative headlines for weeks on end, energy markets have been resilient. The price action isn’t a screaming buy, but considering there was another round of production hike announcements that kicked off last Sunday night, the fact that Crude Oil closed the week more than $5 off the Sunday/Monday lows says something. We see similar strength in Gasoline, Heating Oil, and Natty Gas. Energy markets have been given plenty of excuses to crumble, but they are so far holding up.

When looking more broadly, the market action tells us that being bearish carries some serious risk at least in the short term. When the seas got rough after Liberation Day, Gold was the safest port in the storm. Since the S&P, Bitcoin, the Dollar, and other risk assets started to rally in the last week of April, Gold has basically gone nowhere. Other safe havens like the Franc and Yen have been trending lower during that period. As always, this could change Monday, but if we’ve been listening to what the market has been saying, it’d be hard to interpret it as anything but bullish.

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Under the Hood

Volatility, Correlations, & Dispersion

The first three months of the VIX futures board flipped into (slight) contango and VIX was able to break below 22.50. These are the incremental, positive improvements