Another week rolls past and this low volatility distribution continues for most asset classes, GBP and bullion aside.
This is a very mature bull market so its no wonder that risk asset volatility has declined here close to achieving new highs for many. The divergence between US risk and world risk also continues. US is seeing some positive rotation clearly occurring away from defensive and towards cyclicals but its not produced higher index highs as yet. US utilities are seeing a steep correction vs financials and tech which are looking much more positive. World rotation is not occurring with defensive themes in Asia and Europe still performing relative to cyclicals. FX wise the major pairs GBP aside still need direction although clearly the EUR and JPY appear to offer much to the downside for both and particularly for asymmetric traders, as mentioned.
For my own book its a little frustration this recent price action as its a continued scenario of 2 steps forward to 2 steps back over the last 2 months or so. Bullion coming off recently knocked the account back down just as she achieved a new record high earlier this week. Personally unconcerned about the bullion allocation for very clear medium and longer term macro and technical reasons. On the shorter term it could be the short term canary for a stronger US$ and cyclical risk positive performance.
Here to the reports..
All very reasonable points which are hard to argue with. The levels are clear.
Ground up, the mega caps remain bullish, technically speaking. They have enough room to fall from here and retain their bullish patterns confirming the positive 2017 view.
Here LC more bearish on the short term.
From a technical trader perspective its fair to be nervous here. Climbing that wall of worry is the concern.
Here MS with their weekly view:
And here SC with their fx weekly.. Picking up the two favorite tech themes of Eur and JPY possible weakness.
There is no meaningful news on the ctfc allocations. The GBP short trade is certainly an extremely full trade. Every one and their dog are in the trade so beware any unexpected comment from the BOE re less liquidity. The reversal would be swift indeed. Macro wise, so far policy makers in the UK look to sustain the recent devaluation moves as larger deficits are back on the fiscal table. The only other noteworthy ctfc comment would be that jpy longs actually increased last week further adding to the potential sweetness of any reversal.
Good luck to all for Q4. It promises to be eventful as we have US election results. Big policy moves from the FED and very likely from the BOJ and and an outside policy move from the ECB. We have a potential temporary resolution to the Eurozone’s banking crisis part III.
All the best
Rich