[Thread]

Here's my quick and dirty logic.

1. T-bill issuance this week. They need bonds bid, but not so high that our dealers can't grab at a discount.

Why a discount?

1/n https://twitter.com/axelroark/status/1354551624337915910

Foreign entities, like China, need $DXY, duration, and US Equities as a proxy. The game our banks play is to buy treasuries low then spike prices at or near the settlement date, which is 1-2 weeks after the auction.

2/n

They were hoping that by jacking bonds this week, and sending $FAANG to the moon, retail would pile in and load the boat. They'd use this to distribute their $FANGMAN holdings before they drop the bond bid into next week.

3/n

What they didn't expect was that WSB would engineer one of the greatest short squeezes in market history, taking everyone's eyes off the $FAANG and foiling their plans to distribute bags.

4/n

2. They need to dump equities anyway because it's impossible to distribute longs and build short positions at the same time without crushing the market.

5/n

This explains the constant selling pressure this week. However, without retail there to assume the bags, and liquidity fucked due to the short squeezes, they had to dump at any price in order to fully exit longs by end of this week or next.

6/n

3. Bears sold the lows today, but longs are mostly out, which means bulls can easily squeeze the indices in order to trap bears into capitulation, all while they begin building short positions into new ATH's into Feb.

7/n

What happens then is bonds get low near settlement while equities rise and everyone not in the game gets fucked.

Meanwhile, they accumulate vol and shorts for when the time comes to move those bonds.

8/n

4. Now, once retail is FOMO and everyone calling for 4k, they drop the hammer, trapping longs at the top, slicing through illiquid levels (thanks to capitulated bears), and generate a nasty bond move that crushes yields, and has everyone buying the dip thinking it's a trap

9/n

This time, there is no bottom, and we blast below the channel support generating weekend follow-through that creates margin calls and forced liquidation.

All the while, they pass that duration at higher prices and wait for equities to bottom.

10/n

Viola! They have now covered bond shorts, sold bonds on the spike (made $ two-ways) + distributed equities at the highs, shorted the top, and have cash to buy the low.

Suddenly, China (and retail) are all fucked.

11/n

5. To generate this trap, we need metals, miners, equities, tech, small caps, and crypto all busting through their highs and created a real sense of melt-up FOMO.

It won't last, but it'll feel like it.

Watch bonds and vol volume.

/fin