Short recap
Asia in red
Europe opening
lower
US Congress
to vote on government funding
German
coalition talks well covered blockchain technology to make
Germany a fintech hub
Draghi
not ok with EUR volatility due to potential inflation miss
Kuroda –
no near-term hikes
Question –
what now?
Honestly, I am
not sure either…
…as Janet is
celebrating and Powell not being able to find the “Buy” button
Market is down
and Trump focussing on long term fundamentals and not the short term sell off
It reminds me
local CEE politicians who cheer and show up in the public only in good times
Let’s sum up
a bit
S&P 500
was 12% above 200 DMA – markets do not stay very long 10% above 200 DMA
(for regular
bull market it is between 5-10%)
Technicals
showed way-overbought markets
Most of the market
followed the same direction (robots, ETFs, investors selling volatility)
for months/years
Selling
volatility/insurance and now covering positions
But after market
dropping more than 6% all start to hedge (thus more selling)
S&P 500
found support at 2538 (200 DMA) after touching low of 2530
DAX
didn’t care about 200 DMA and found support around 2015 highs, 2017 support
levels
And below 12 275
(76.4% Fibo) after printing 12 141 low
VIX
skyrocketed above 33 (up 113% on a day) but corrected (25+ levels signal
market fear)
XIV
(short volatility ETF) plunged (speculation that Credit Suisse lost USD 500
mln)
Let’ wait for
official comments
Hedging based
on history
Long Gold –
pretty unmoved (sitting right below resistance zone (1357-1375)
Long JPY –
sitting right lows of 108.12/107.31 acting as support but not very affected
Long 10- and
30-yr Trys – enjoyed very decent rally yesterday
Why to hedge?
CBs believe in
rising rates globally on inflation pressures and strong growth
But China is slowing
down and coping with huge credit problems
US economy
topped, EU to follow soon and as Japan population is old, the lag
Example from
2011 – losses prior week, losses on Monday, more at the open on Tuesday
And recovery
taking more than half a year…
What to do next?
As there is no recession risk near term, the
healthy correction & late stage bull market panic is done
Stock markets will hopefully find their calm soon
So we can focus on hunting as a part of final leg
up of the bull market that started back in 2009
…but be aware of:
FX, EM
unaffected (EM equities down only 5%) – a positive sign
One Fed hike
is priced off; If volatility continues another one can get priced off
No global
contagion – a positive sign
Watch today
for Trys yields, JPY crosses, VIX (can fly in both
directions with turning points at 22 or 33)
JPY 1m ATM vols
(jumped from 6% to 10%)
Equities
Broadcom bidding
for Qualcomm (USD 121 bln)
Bayer to sell more
assets (seeds/pesticides) to please EU as it buys Monsanto
Elliot Advisors
don’t like BHP’s dual listing (among other things)
Energy stocks
still worth of looking at (also multiplied by recent sell off)
Boeing keen on a
new mid-market jet
Bristol-Myers
still behind Merck with cancer drugs testing data
Apple and Cisco
come together to work with insurance companies on cyber policy products
Banks moving away
from models to stock picking on new research rules
BNSF Railway (part
of Berkshire) joining Blockchain in Transport Alliance
Earnings
Allergan, GM, Gilead Sciences, Walt Disney
S&P 500 daily
DAX daily
Bonds
10-yr Trys yield at 2.65% vs 2.86% yesterday
Yield at 3.00% a
buying opportunity?
10-yr Bund yield at 0.73% vs 0.76% yesterday
Bitcoin
Bitcoin's Brutal
Week Is Even Worse in South Korea link
So-called kimchi
premium disappears amid government clampdown
Bitcoin prices
globally are sliding to their lows of the year
Data/events
ECB’s Weidmann (0900 GMT)
Fed’s Bullard (1350 GMT)
Feb 16 – Chinese New Year
Mar 4 – Elections in Italy
Should you have any questions feel free to contact me
anytime.
Good luck Champs!
Mr Hawk
DISCLAIMER: This
material was created for informational purposes only and represents the Land of
Trading team’s view of the past and current economic and capital market
environment. It is not an investment advice and should not be viewed that way
at all, and the creators of this material cannot be held liable for any
potential losses resulting from trading, where despite this disclaimer someone
would consider this material as an investment advice. All rights reserved
©2016. Contact: landoftradingATgmailDOTcom
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