Markets have clearly been all over the place as we try to digest today's US #CPI print. But actually looking pretty bang on for what I told subscribers to look out for this AM. Noted lasted week that #skew going bid into this CPI was counter to previous months' CPI ☟☟☟ 𝞂 It's been pretty well signaled that the @federalreserve's reaction function has recently been more anchored to the labour market. But the combination of: Latest jobs report + robust ISM services + bounce in used car prices = Investors worried inflation might be picking up once again. 𝞂 You also had terminal rates pushing back up towards 5.20% on hawkish Fed speak. Spurring on the downside hedging that we saw starting last week. But this is the opposite of what we saw heading into previous CPI prints of late. Why? 𝞂 The bullish price action so far in 2023 forced a lot of investors back into the market. And when people actually own the market, that's when you see people reach for put protection and get a spike in skew - like we've seen in #SPX lately. But tell me this... What happens when market participants mainly use short-dated options for their protection? 𝞂 That's right! They have to quickly monetize those short-dated options on the downside move. Leaving the potential for there to be a significant unwinding needed that could take the market right back up again. 𝞂 So, theoretically, let's say there was an inline to slightly hot CPI print while skew is bid up on short-dated options... Despite any knee-jerk reaction down you might see, we wouldn't be surprised to see the week close higher as dealers need to cover deltas. Oh, wait - that scenario sounds eerily familiar. 🧐 𝞂 𝞂 𝞂 How do you feel about these single long-form tweets vs. the usual thread format? Let me know in the replies! 𝞂 𝞂 𝞂 Don'tdoesn'twouldn'tlet'swe'vethat's@federalreserve's It'smonths'today'sONUS Don’t forget that right now, you can get a free month of our market research and daily trade ideas! Just use the link in my Twitter bio and enter code RV2023 at checkout.