From failed moves come fast moves and indeed we can see we have a failed bear attempt here.
Looking across asset markets the bears had a momentum. There was a window in which instruments converged to provide an opportunity for a significant wave lower. Oil sunk to 35, eurostoxx50 broke down, the Eurusd broke out, the Jpy broke out vs the usd, the beta risk instruments like dax and ftsemib and ibex35 all broke down as well as copper and many commodity fx pairs produced patterns away from risk. Sectors like the crucial euro banks sunk badly. The single set of instruments that stayed remarkably strong were the mega cap US stocks. Even within the US the transports and Russel2000 were showing negative omens.
The bear moment or opportunity lasted about 48hrs and then it passed. Oil bounced followed quickly by commodity fx and then the beta stock indexes of dax etc all rallied hard. If you weren’t quick to reverse you could have be burnt but really the patterns were all very clear and with ‘from failed moves come fast moves” in mind you had to reverse quickly. You had to see the oil breakout (although oil famously choppy and false signals), the commodity fx patterns again very quickly reversed and then the dax breakout of her down trend and then the sp500 and the russel2000. More recently the euro banks breaking their significant recent down trend since march 22nd.
The subsequent has been fast and hugely rewarding if you were a part of it.
For my book i’m still holding a lot of cash but trading wise, i reversed correctly and took profits on the various index shorts and option puts and cleared the commodity fx positions at break even levels. I entered long correctly on the various beta breakout instruments and a few sectors but rather than holding long etf or cash positions in stocks im holding cfds in the main to play the bounce. Its therefore a tactical position rather than a strategic long. It seems correct positioning for now.
I have seen all the email requests for the reports but Ive been traveling over the last few days and the moments ive had ive needed to focus on my own book as some focus was needed. Sincere apologies for the delay.
The Swiss team make no strategic shift but do extend their timeline and levels ever so slightly.
Without delay here the swiss teams report:
As we are starting earnings here a couple of earnings related reports:
And here Yardeni
And here GS
Fitzpatrick and MS and a few others to follow here:
Firstly MS with their FX analysis:
I was a little late to read this but i see they are making a very similar set of conclusions regarding the JPY. Technically, as i mentioned on the forum pages, the recent bounce in risk did little to assist the jpy debasement that Abe and the BOJ so desire. The price move totally lacked momentum and given the over bought level the jpy was at pre the risk on move it was extremely disappointing. The USDJPY is broken in terms of risk on transmission now it seems. This spells virtual disaster for the BOJ and potentially Abe. I see the BOJ now owns over half of all the etfs listed in the Japanese market now. This is a virtual nationalization of corporate Japan. They continue to increase their holdings each day. It is a deleveraging event again for the world’s 4th largest economy. It remains to be seen how this plays out and whether Japan becomes the first heavy “helicopter” player. Obama has announced a 7.7bn student loan debt forgiveness program but not yet funded by the FED’s balance sheet, so this doesn’t count quite yet.
And here hot off the press the latest Fitzpatrick, citi’s tech guru, comments:
Its a great technical piece of work this and he raises the several trillion dollar question of what occurs to the eurusd? It is a very good question and we can see that every day the inverse correlation is in effect. Technically, that risk on equals euro and jpy weakness but that the price momentum is weakening. And that, big picture, the BOJ and ECB’s bazookas are getting bigger and bigger but the pay back is getting smaller and smaller.
On the wider macro scale, we also see a world economy of diminishing returns from the debasement strategies. That no economy is immune for more than a few months of a strong currency. When price momentum is lacking and diminishing from ever greater efforts it is clear that the central banks are becoming ineffectual. And that soon a super bazooka by either many have the opposite effect on their economies. A total loss of faith, deleveraging and job losses alongside a currency crisis demanding capital controls. A current account crisis alongside a plunging currency banana republic style. Not a pretty event.
Follow on questions of what crazy policies the neo keynesians would adopt to combat these events must also be asked and would imply more control of asset markets, particularly floating fx, with doubtless centrally planned “stabilizers” implemented and therefore controls on traders. This would not surprise me.
Again, kindest regards and i hope you all were able to navigate this last weeks shifts. Its sometimes not easy to do the 180 degree shift but if you apply the same technical charting and price pattern principles evenly the actions should follow fairly unemotionally. Its not easy to do this but it will come.
Rich