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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

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.

26Oct Macro Video: Negative real rates drive reckless risk taking led by the fastest horses as the impact of Moral Hazard in 2009 is felt across markets and society

26Oct Macro Video: Negative real rates drive reckless risk taking led by the fastest horses as the impact of Moral Hazard in 2009 is felt across markets and society

*The everything rally in US equities, Bitcoin highlight the bubble inflation being driven by extraordinary low rates and momentum driven inflows.
*Breadth improves but the fastest horses still drive – Tesla breaching USD 1trillion market cap on 55% daily US market option premium traded.
*The seeds for both reckless risk taking and a society that believes there is impunity to act as they want stems from the Moral Hazard bailout of the GFC 13 years ago.
*A pick up in “greed” indices suggests we are entering a final stage for this bubble rally – but caution in trying to pick the top!

24Nov20 Macro Video: Sustained rotation to value coupled with lower vol points to increasing risk of short term equity bull run

24Nov20 Macro Video: Sustained rotation to value coupled with lower vol points to increasing risk of short term equity bull run

*Dashboards show that overall major markets have remained trapped in ranges over past week, but rotation trade into value is being maintained.
*The recent outperformance of Bitcoin and Oil relative to Gold / Silver shows the importance of positioning in that overall rotation.
*A recent theme has been whether Bitcoin rally shows investors are still “seeking” risk and not protection; this points to the potential for near-term sharp gains in SP500 led by broadening out across sectors.
*A break below 20.0 in VIX would be a catalyst for this if in conjunction with a weaker / stable dollar.

17Nov20 Macro Video: Higher uncertainty-Lower implied volatility paradox in force but this foretells volatility to come.

17Nov20 Macro Video: Higher uncertainty-Lower implied volatility paradox in force but this foretells volatility to come.

*The issue of sequencing of themes remains hard to navigate for investors generally with higher levels of positioning short USD and long equities.
*Notable is collapse in vol – VIX testing 20/24 support zone – when real economic uncertainty remains so high.
*We remain on alert for a yearend meltup IF USD / US rates / Vol remain rangebound

24Jul20 Video: High Alert for pick up in short-term volatility as echoes of June selloff ring loud.

24Jul20 Video: High Alert for pick up in short-term volatility as echoes of June selloff ring loud.

*Oversold Dollar and pick up in FX vol signals risk of increased volatility ahead
*Recent USD weakness and underperformance of the “fastest horses” such as Big Tech is analogous to the moves prior to the June risk selloff
*We see heighted risk of similar price action in the coming days, especially with the FOMC next week.

06Jul20 Video : Sustained US Dollar weakness could rotate from higher asset price inflation into domestic inflation

06Jul20 Video : Sustained US Dollar weakness could rotate from higher asset price inflation into domestic inflation

*Considering US growth equity outperformance, we hypothesise excess US Dollars have been hoarded in US assets.
*US Dollar strength has attracted capital into US equities showing positive momentum, but has depressed domestic inflation.
*A resumption in USD weakness, whilst initially driving US stocks further into bubble territory, could generate real inflation with significant consequences.

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