After an exhausting end to a tumultuous March, traders are wading back into markets after the Easter Holiday with some restrained optimism. The US Non Farms payroll jobs report, released on a market holiday in a rare occurrence this past Friday, showed solid growth, marginally beating already lofty expectations. The solid jobs number has boosted strength in cyclicals, reigniting the re-open rotation away from growth tech that gripped most of the month of March. The US dollar is still relatively strong, and US treasuries are weak leading to higher yields as traders start to anticipate an eventual easing of Fed support as the economy rebounds.

While the story for the last 6 weeks has been a narrative of rising yields leading to a route in growth tech stocks, the aggressive selling in those names seems to be subsiding. Over the weekend Tesla announced strong growth in vehicle delivery numbers, easing one of the longest standing concerns with the company as production is exceeding expectations. Naysayers of Elon Musk and Cathy Wood who had been emboldened to take short positions in lofty tech names last month might now be covering and taking the win as they sense that their profitable shorts could turn around very quickly on good news catalysts like Tesla’s numbers. I believe that caution from shorts, along with deployment of investor capital coming in for Q2, will help to put in support in tech and counteract a lot of the pressure being put on it from rising long term yields.

As markets are drifting higher, implied volatilities are continuing to get crushed, with many individual companies now trading at vol levels that imply that their movement over the next year will be less than the realized moves they’ve had in just the last 3 weeks. Even in indexes, as many analysts are talking about local highs and lofty valuations, implied vols are low and no one is particularly worried about a real correction. It seems conventional wisdom is for a quiet market drifting slowly sideways for the near term.

In Crypto, “ETH is the word and the word is ETH”. After struggling to reclaim levels from February for all of March, ETH finally broke through $2k and has so far been handily maintaining that level since Thursday evening. We’ll see what today brings, with US markets coming back after holiday marking what I would consider to be the first real non-holiday trading since Thursday. At least some amount of ETH’s strength over the weekend came at the expense of BTC, as some crypto traders worked to rebalance their portfolios in much the same manner that equity investors rebalanced theirs last week. Even though BTC has been solid, it has struggled to reclaim 60k, barely touching that level once only to be smacked back below that level. However, BTC support in the 57k-58k level appears to remain intact.

For the start of this week, the main risks that I am focused on remain the strength of the US dollar and weakness in long dated treasuries. I will be watching the levels in these as an indication of how much of the movement we saw in them over the past couple of weeks is real and sustained, or how much was potentially transitory and just an effect of a large amount of rotation and rebalancing heading in to the end of the quarter.

I’m also going to be watching Chinese markets when they come back from their 4 day holiday tonight, and Hong Kong which comes back after 5 days off tomorrow night, as an indication of risk appetite in the Asian region. China has been in a 6 week bear market after reaching highs in early February, and was just starting to show a little strength last week. If they can come back with a healthy risk appetite after the holiday, I think that would bode well for crypto as well as Chinese equities, especially China tech that has been beat up severely from a myriad of negative catalysts.

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