Anyone Want Bonds? Anyone? - Apr. 8, 2025

My Journal

machinaquanta.com ← analytics site & education material

---

Mon. Apr. 7

Entropy collapsed to another low and so did the SPX. I feel it’s harder to gain edge when both are going in the same direction because you want the entropic model to ‘catch’ or see what the rest of the market cannot so that you can position in advance. It is hard to position if the index has collapsed before its even opened.

Interestingly, on the gap down, SPX almost tapped our 4800 level. This is what happens when you have too many traders looking at the same levels. These levels get front run (not the first time this has happened to us). Let’s see how confident buyers are next time we visit 4800. The market will do what you least expect it (or want it) to do.

I was thinking that last Monday we had a gap down and we went red to green (typically what I would want in a bottom) and that signaled an interim bottom so, what were the chances it would happen again on a Monday? Well, funny enough that’s just what happened.

I suspected GEX would decrease at a slower rate by close on Monday despite the index down, that would signal to me an anomaly and bit of exhaustion, certainly from dealer hedging dynamics. We were/are already at incredibly negative gamma levels where bounces typically occur (even if short lived). Market makers were likely to reverse position and load up ES futures in the opposite direction (long). Well, GEX closed as we expected which gave enough fuel to send ES into a gap up overnight. Look at that tiny little curl up in GEX (orange line below).

Source: https://squeezemetrics.com/monitor/dix

Why did I not short on Monday? My largest reason then was that the move down already happened and GEX was unusually low already. I don’t want to short when I think GEX is near bottom. I would prefer a bounce in GEX first, otherwise it really works against me (probability speaking).

Tues. Apr. 8

Tuesday, we gapped up on [pick any reason you like, it doesn’t matter, computers are trading in this environment]. Good job market makers for the pump job. The quant model luckily saw through this nonsense today and that presented a good hedging opportunity. Remember you want divergence, that is edge.

I would have preferred hedging much higher. I had ~5300-5400 on my line of sight but this market has been front running non-stop so I wanted to get protection in sooner than later. I got lucky with timing today as Trump started his tweet bombs again. I can’t stress that luck has a lot to do with how things go too. I humbly admit that. Let’s just make sure our tools help put luck slightly more on our side.

At some point with massive selling and deteriorating fundamentals it impacts credit and leverage in the markets. So, I had a few position adjustments and trades alerted in the morning chat:

• IBIT: I cut for ~6% loss and ~35% on the calls. The relative momentum had converged back to 0 between QQQ and BTC. BTC had broke support into a range where I felt my edge on this was no longer there. Better to cut and enter later after reevaluating.

• SPX: I grabbed SPX puts 30 days out just in case the entropic model saw something that I couldn’t.

• USDJPY: based on the leverage comment above, the carry trade in this pair is one of the proxies of leverage in markets. There’s other reasons for this pair to move like interest rate differentials, but short term I am considering leverage. So I started shorting.

What’s Next?

Credit has had better days.