Week of April 13

Sell the rip - but not until the flows turn.

Recap of last week

Last week we had a monster gain on our short puts and long calls. We are not Trump insiders, but knew the situation was untenable and that a TACO would come, just not exactly when. We have been holding a risk reversal position since Mid March that shorted both puts and calls to fund a closer ATM call for this exact situation. A TACO, at some point, but not too soon after the original start of the conflict in late February.

Realistically speaking, we played it perfectly. Its an open secret that this administration is manipulating the markets and is rampant with insider trading. We are not privy to that information, but we did know the end to the war would be coming, and we capitalized on it with our options structure. We were not foolishly caught net short like many were. We did not get ourselves lost in the bearish cacophony. The risk reversal was closed for a +150% gain in total, then rolled again, and that position is green also. We had zero equity shorts. Zero oil longs. We are directionally agnostic as always and will go long when the market wants to go up and short it when it wants to go down.

Obvious elephant in the room. Do we sell this rip or buy into it. I believe we remain in a sell the rip market. But I think it is too early.

Next move for markets

Up. Its all about the flows. Nothing else. Here’s where the crowd is getting it so wrong. They are analyzing the Strait of Hormuz, commodity flows, they are translating tweets from MB Ghalidaf - is that how you spell his name? To be honest i dont even know. And I dont care. Because its not helping me make money so its meaningless to me. They are frantically copy pasting Iranian tweets into google translate trying to figure out secret meanings. That is all a waste of time, even worse, its a distraction leading you down the wrong path. This market is going higher, because there are simply going to be more buyers than sellers. Its not about whats happening in the war. Its about buyers and sellers right now. The imbalance is simply too great in favour of buyers at this point. Iran, oil, CL1, mb ghalidaf, arragchi - I dont care. Watch the flows.

First things first, the genesis of the market rally. The infamous TACO. People again are missing the point here. Its not about is the ceasefire going to be successful or not. I am going to be honest with you, I dont know what the 10 point plan is and I am not even going to read it. I dont care. Here is what matters. Its that Trump is signaling that he doesn’t want to continue the war. In essence, the Trump put has been activated. Because the polls forced him too. Its not about, did he succeed in the ceasefire. Its about the fact that is actively trying to dis engage and save the market. If this doesn’t work he will keep trying. And he will eventually succeed because hes the leader of the Free World whether we like it or not. Dont fight the Fed, and in 2026 you dont fight the White House either.

I think naive and uneducated traders often lament the woes of being a retail trader. Its actually pretty amazing, in the present day 2026. This aint 2006. I remember as a kid everyday I would get the mail for my parents and my dad would have 3 or 4 letters from ETrade like every single day. Today, you can go sit on the toilet and on a whim flip your entire book in 30 seconds. Institutions cannot do that. The TACO came out of nowhere, and we had a wild Wednesday and mosnter short covering. Now the data has hit the insititutional desks on the week end and we need a magnifying glass to see the short covering that actually took place. The war is effectively over in the markets eyes, as in the rate of change and escalation has collapsed. Hedge funds covered a gigantic amount on Wed/Thurs, but not enough. They will need more time to their nets back to where they should be. Just because you can close out all your shorts in 10 seconds doesnt mean the big boys can. Have to remember that. This is a big reason why “moves go on much longer than you expect”. Because even if a move is obvious. Institutions need time and liquidity to properly transact.

As a matter of routine, we religiously track systematic flows in the market because they are just so important. It is extremely rare to see this green wave. Last I recall was last April 2025, you know the rest. These are really big flows, and indiscriminate. I will not fade these flows 99% of the time. And let me tell you one thing, CTAs are not translating Iranian tweets or dissecting all the 10 points of the ceasefire. They are just buying futures, and lots of them.

How big is this flow relative to recent history. See above.

If you have been reading my weekly posts for a while now, a feature of the early 2026 market has been extremely long dealer gamma near the local highs at around 7000. This was in large part due to option overwriting structures both from independent investors and now major funds like JEPI JEPQ etc. This created a very strong resistance level aided by dealer gamma positioning. In laymans terms dealers were selling into rallies above 7000 actively surpressing upside moves. This has now all changed dramatically. Dealers are extremely short gamma on a 5% upside move. They go from surpressing a rally to now accelerating it.

Latest read on the GS vol panic index which is essentially an aggregate view of how much is the market hedged right now. After the massive squeeze and short unwind of the latter half of last week, we remain quite elevated. The ceasefire will fail view is not unique. Not at all. The market can and will continue higher just based on pure mechanical flows. As puts decay, and ehavy macro shorts remain embedded in the market, these will have to unwind sooner or later. This is continued fuel for a continued squeeze.

A look at what the crowd is expecting. This is not sentiment, this is not a survey. This is what the options market is pricing, or what people are actually betting their hard earned dollars on. Everyone is betting for a crash or continued downside. Almost no one, is betting for a rally. Whats the pain trade? What move here hurts most investors in the worst possible way. Higher stocks.

Last but not least, this is a feature very common in markets, strength begets more strength. GS ran a quant backtest on the SPX when its up 6 days higher in a row. The results were overwhelmingly bullish and hint to with high probability that the bottom is in and if we do get another dip its a dip to buy.

Ill end with something not so bullish. I have outlined why I expect higher prices in the near term clearly. Flows. Flows have a beginning middle and end. They will not last forever. The bearish forces at play on the market since last year remain. IGV just closed at a new YTD low. This was in large part due to the latest development in the AI space from Anthropic, Claude Mythos. The details of what the latest model can do arent important. What matters is software which is one of the most crucial sectors of the market remains in a strong downtrend and this is a major player in the Private Credit space which continues to collapse behind the scenes. Software remains in a bear market, therefore so does Private assets and financials writ large will continue to be weak which considerably caps the upside in the SPX. Financials are the second largest weighting in the S&P 500.

To sum up, the details of the war are irrelevant. The market will continue higher because the flow of funds are overwhelmingly bullish at the point in time. There are just too many buyers at this price and at this time, and none of them care about whats happening in the Middle East. Its purely mechanical. Positioning has been wiped, sentiment has reset aggressively, this is a classic bullish setup that you want to lean into. Bigger picture, software continues to collapse and we remain in a historically weak Midterm year. Therefore I continue to prefer trading this squeeze via options rather than outright long stock. But until the flows picture dramatically changes I believe buying dips is the preferred strategy.

Trade Ideas

1. Continued long risk reversals,

2. ES will alert in the chat