Left Tail Delayed; Right Tail Green Shoots

Left Tail Delayed

This is doubtful:

Trump may declare war on Iran this evening during his State of the Union address to Congress - Israeli media citing a senior U.S official via @YourAnonTV

I wouldn’t doubt that Trump will bring Iran up, but I doubt he will announce a strike against them right now. For one thing, Indian PM Modi is in Israel next 48 hours, so it is not likely the world falls apart over the next few days. Modi departs evening of the 26, the day of the Geneva meetings with Iran.

Then we once again enter a new month and new moon! Yes, apparently it’s a thing: the Blood Red Moon March 3rd, with the “Purim” the day before (Monday). Some speculate that this Israeli holiday - celebrating deliverance from a Persian plot to destroy the Jewish people - would be a likely strike day. I have no idea.

I can see news that China may be supplying supersonic missiles to Iran, even if this would be in direct violation of the UNSC sanctions.

But then so too is it a violation of the UN Charter Core Rule (Article 2(4) to use force against an independent state/sovereign nation - unless under attack, for which there has been none by Iran.

As such, Trump has been warned by many an Arab nation, not to mention Britain and France. Even Tucker Carlson tried to dissuade Trump from moving forward with any military operation against Iran Monday after his shocking interview with US Ambassador Mike Huckabee in Israel last week where Huckabee justified US fighting wars on Israel’s behalf.

Given all the continued movements of US military assets into the region, it would appear Trump is steadfast in proceeding with an action that could easily lead to an Arab Spring 2.0. But it does not appear that a strike is this week. More likely post Ramadan March 18th.

As I warned, crude oil prices have risen and won’t just spike from $65 to $75, but threaten $95 on risks of closure to the Straight to Hormuz. Supply chain disruptions would send a deflation shock to US rates and equities. US dollar would likely bounce as VIX spikes.

There is no remedy to the above save peace. China would be enraged as their #1 supplier of oil is engulfed in a regional war. Russia would likely press their advantage in Ukraine.

So big picture: don't forget to hedge!

Right Tail Green Shoots

But if you are of shorter duration hedges, be alert.
My live trading room focus today was to highlight not the SOTU address tonight by Trump at 9 pm ET, or NVDA earnings Wednesday night, but the right tail opportunity starting to form that could cause a surprise…

Clients already knew I was expecting a push higher in indices as VIX fell back from 22 and broke 20.57. NASDAQ surged 1.08% to close at 22,870.95 with a focus on strong oversold bounces forming green shoots for my trading plan.

Case in point: TRI which is Thomson Reuters, profiled weeks ago as part of the AI disruption tech short ecosystem. Today it bounced perfectly on monthly support at $82.51 with a 12% gain. That’s not new-found investors as much as puts monetizing. And I think we will see a bit more of that in the next few days/weeks ahead of real risk-off events.

I am also stalking my growth/value ratio like a hawk for signs of a right tail risk-on tech bounce. These bounces - up and down - could go on for a few weeks so “be quick or be dead” if you plan to actively trade them.

The very popular software index, IGV, is poster child of the tech wreck, after wiping out two years of gains and nearly a $trillion in market cap. I did say past few weeks when many were trying to catch this falling knife to let it fall. Now that it has hit 77.89 monthly support I can see potential for puts monetizing and a chase long - even if 70.91 at the 400W EMA is MUCH stronger support.

And here’s why: RIGHT TAIL CALLS ARE SUPER CHEAP.

Why does that matter? Well, when Charlie McElligott of Nomura calls attention to that fact, portfolio managers notice!

So as I discussed this morning live, the very high dispersion skew for NDX is due to come back in, if only for a trade, which means the deleveraging/degrossing of NDX plays while bidding up VIX (hedging) could be quickly unwound on select OVERSOLD issues. And by quickly I mean that those overwritten calls and bought puts could force a ‘double’ long, where puts bleed as the underlying bounces so they cover, all the while folks get ‘stopped-in’ on sold calls.

Of course, if Iran escalation is pulled forward, then downside hedges pay. But if risk-off is closer to March OpEx, then these near-duration downside hedges will bleed and that can force a rally. It’s mechanical, but your short-duration puts won’t care.

So be on the lookout, and/or roll-out/add time. That’s all I wanted to say about that.

And why I warned yesterday to protect value longs and not overstay your tech shorts - if you are on a shorter duration. I still see volatility mid-March to Mid-May regardless of the violent bear/bull traps in the weeks leading up to it.

Or until we get a macro event risk of size. I still contend: