After last week’s holiday from providing a release this week we have a bumper catch up release.
We have major movements across risk asset markets. Equity indexes have a tactical correction in play with yesterday the Sp500 even breaking her 2120 level. But looking in more detail we can see the evidence of a sustained bull market here as cyclicals continue to improve relatively vs defensives, rising inflation expectations, ie higher fixed income rates and some hot technical signals from copper and commodities in general.
Without delay here the Swiss team’s latest outstanding report:
From a trading perspective i would respect, for now, the latest developments of relative strength of the cyclical relative rally. Chose your shorts very carefully. Copper and platinum specifically look good from a trade long perspective. I particularly like the lack of cftc longs on platinum. Bullion and miners are bouncing. Gold miners fell the hardest vs their underlying metal (ie gold) and offered the best long entry on a relative basis, as said 2 weeks ago. Lets get the US election out of the way but once its done the dax, as a key cyclical index, in breakout and supported by the euro bank breakout and likely weaker euro to come offers much. For the European Alpha index the Ibex35, now spain’s political quagmire is over, offers much upside. Again once we the momentum bull mkt resumes.
As a side comment the guys are sticking to their commodities secular bear position. This is the market consensus position. I have no fixed mind set on this but if when this market expectation shifts the allocation to commodities would be significant indeed and set up the rally of the decade potentially. Its likely a monetary move due to stagflation if/when this occurs. Its a longer term issue, for now.
Here Fitzpatrick’s latest and last week’s report:
And latest:
He is sticking to his “much lower euro” guns and generally higher US$ position. I tend to agree, near term weakness aside. A quick macro comment to make sense of higher commodity prices alongside a higher us$. The world is awash with continued monetary expansion. In most zones well over 5% m3 gains and climbing. In this environment even higher nominal rates are likely to lag money supply expansion. Therefore real rates are actually falling not rising and this is supportive therefore, especially in low capex environment, of much higher commodity prices. The macro explanation of what we are starting to see occurring is very straight forward and is something I forecast some years ago.
And here Citi’s HK guru with his FX weekly run through
And here LC with their excellent tech run through.
Showing more weakness to come..
And here UBS tacking a ground up look at the technical back drop for US stocks:
Its remains bullish although a few have fallen to neutral reflecting the current near term weakness.
And here Sc with excellent reports:
In spite of future strength, tactically, as the us$ long trade is full, SC have it right that