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26Nov Chart Video: Nu Covid variant concerns drive sharp risk off in Asia session – liquidity driven volatility likely in short-term

26Nov Chart Video: Nu Covid variant concerns drive sharp risk off in Asia session – liquidity driven volatility likely in short-term

*Concerns over new Nu variant and stopped flights from South Africa driving risk off tone in Asia albeit in VERY poor liquidity conditions.
*Recent risk of trends extending with AUDJPY leading the FX pairs and Oil trading back to support zone at 74/75 in WTI.
*Nikkei weakness leads US equities lower and bonds higher – BUT we are still firmly in established ranges.
*No changes to RadarScreen – we prefer to let the market speak today on what will still be a very liquidity-stressed session.

25Nov Chart Video: Red hot US data and hawkish Fed minutes point to realisation US economy is overheating

25Nov Chart Video: Red hot US data and hawkish Fed minutes point to realisation US economy is overheating

*Red Hot US Jobless Claims and Core PCE inflation shows the US economy is potentially overheating as the Fed minutes show increase in inflation projections and signals taper could be accelerated.
*Fed President Daly made hawkish comments on both taper and rates – she is a noted dove and this highlights the shift in tone at the Fed to risk management over the slavish adherence to “average inflation targeting”.
*The Fastest Horses show us that momentum chasing in 2021 has really been a function of the rallies in 2020- and this is not gong to be sustained in 2022.
*BUT – price action and sentiment still indicates a “santa rally” in equities could play through – this is very reminiscent of 1999/2000 for us.

24Nov Chart Video: Oil calls added to RadarScreen as release of SPR Oil reserves shows political risk of inflation growing

24Nov Chart Video: Oil calls added to RadarScreen as release of SPR Oil reserves shows political risk of inflation growing

*The collapse in the Turkish Lire reminds us that markets are manipulated by policy makers and politicians to serve their own ends and narratives.
*This is shown in the ridiculous decision to release 75mio barrels Oil from Global reserves – amounting to around 18hours of global demand.
*This highlights the panic over inflation that is starting to build – politicians think they need to “do something” when their policies have created the issue.
*Oil calls added to the RadarScreen – cleaner positioning and inevitable OPEC+ response offers good risk reward to play for higher Oil prices in near term

23Nov Macro Video: Powell renominated but increased concern over inflation is bringing anticipated volatility across markets

23Nov Macro Video: Powell renominated but increased concern over inflation is bringing anticipated volatility across markets

*The Powell renomination to Fed Chair is overshadowed by the clear shift in concern over the level and persistence of inflation as the implications of massive fiscal and monetary overstimulation are being seen.
*USD strength is tightening financial conditions as the market continues to underestimate the pace of rate hikes in 2022 after taper pace is accelerated.
*The question is whether the US equity market can make another Santa rally run higher on buy backs and retail inflows – but the rally is increasingly on borrowed time.
*This is especially true for US “growth” which relies on a plentiful zero cost of capital to survive.

22Nov Chart Video: Fed debate over faster pace of taper grows as annoucement of Fed Chair imminent whilst EU lockdowns grow

22Nov Chart Video: Fed debate over faster pace of taper grows as annoucement of Fed Chair imminent whilst EU lockdowns grow

*Covid restrictions are rising in Europe as lockdowns are reintroduced but this is unlikely to be mirrored in the US and UK (hopefully!)
*Fed Presidents Clarida and Waller call for discussion of faster taper – highlights the hubris of Fed assumption for transitory inflation whilst annoucement on Fed Chair imminent.
*This “should” be negative for risk assets BUT markets remain trapped in the FOMO and TINA narratives around equities.
*We maintain a cautious setup with a tactical focus running into a data filled Thanksgiving Holiday week.

19Nov Macro Video: Strength in US growth, Semis and even Apple indicate the year-end US equity “melt up” could be commencing.

19Nov Macro Video: Strength in US growth, Semis and even Apple indicate the year-end US equity “melt up” could be commencing.

*Whilst the market continues to wait for the Fed Chair annoucement the tone form Fed speakers is increasingly hawkish over inflation in line with many independent commentators (and us!)
*We believe central banks will have to tighten policy far faster in 2022 and this will ensure investment climate in 2022 will be very different from 2020/21 with higher volatility.
*The outperformance of growth over value led by Semiconductor sector is setting up the year-end melt up rally we have been waiting for: Apple rallying too is adding to the conviction level.
*We are long 17Dec SP500 4850 calls on RadarScreen and looking to add to year-end upside

18Nov Chart Video: Increasing chance of a Brainard Fed points to more dovish policy as UK data removes further excuses for BoE to not hike in December

18Nov Chart Video: Increasing chance of a Brainard Fed points to more dovish policy as UK data removes further excuses for BoE to not hike in December

*Increasing chances of Brainard nomination for Fed chair helping to take steam out of USD rally which was looking increasingly overextended.
*A Brainard fed would be perceived as more dovish even as inflation and labour data improve at pace, especially in UK where BoE would appear to be out of excuses to hike in December.
*Commodities are fading whilst Transports and Travel stocks turn lower – combination of inflation (tax on consumption) and Covid restrictions biting.
*Despite this – we continue to look for signals of US equity seasonality driving an equity rally into yearend but recognise some volatility possible after equity option expiry on Friday.

16Nov Macro Video: Stronger US data drives USD upside breakout as US indices wait for Tesla to start the Santa rally!

16Nov Macro Video: Stronger US data drives USD upside breakout as US indices wait for Tesla to start the Santa rally!

*The debate over Central Bank inflation from current and past policy makers, forecasters and investors is growing cacophonous as we await the annoucement of the new Fed Chair.
*Russian Aggression is clearly a huge risk event and is helping EURO weakness and US data upside surprises are adding momentum to a dollar upside breakout.
*USDJPY is gaining upside momentum – a break above 114.50 opens up test of 116 and onwards to our target of 118 – we hold 11Feb 116calls on RadarScreen.
*The Tesla “musk-liquidation” is in force and taking upside steam out of markets generally – BUT 900/1000 is support and a turn up would act as major catalyst for our call of a year-end “everything” rally.

12Nov Macro Video: As inflation becomes a political problem the “no-rules” market still points to a year-end US Equity led meltup.

12Nov Macro Video: As inflation becomes a political problem the “no-rules” market still points to a year-end US Equity led meltup.

*The persistent nature of inflation has become a serious political issue and is likely to worsen through the coming months putting increased pressure on all policy makers.
*The failure of COP26 to make significant commitments on climate change reinforces our theme of De-Globalisation which is by definition inflationary.
*Meanwhile – the near term risk is for a significant melt-up in US equities into year end driven by seasonality narratives and sheer amounts of inflows.
*Whilst we view this as a “final” inflaiton in the equity bubble, we are looking for short term tactical upside opportunities to play this.

11Nov Chart Video: Huge US CPI print points to policy maker dilemmas over rate policy as nominal yields look far too low

11Nov Chart Video: Huge US CPI print points to policy maker dilemmas over rate policy as nominal yields look far too low

*The huge US CPI print showed – across sectors and regions – that the central bank assumption that inflaiton is “transitory” and will have no permanent impact is simply wrong.
*This aligns with a global rise in inflationary pressures created by years of overstimulation of economies since the GFC and the monetary/fiscal stimulus into a pandemic driven slowdown that was NOT a real recession!
*The poor US 30year auction shows the drop in demand for long end bonds, whilst the gap between real rates and breakevens all point to nominal long end yields in DM being far too low.
*This has negative fundamental impact on equities – but this is a no rules market! Instead USDJPY upside added to the RadarScreen.

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