Its the time of the week for another technical run through the major world asset markets.
As so often is the case much seems to rest on the decision of the world’s central bankers. The Eurusd is very extended and is affecting all asset markets. Nonetheless, it seems any manner of technical setup can be over ridden by monetary debasement maneuvers and even central bank jaw boning, for the moment.
Lets start with the Swiss team’s cross market technical run through:
Note their spx levels comment for the coming days and weeks. Tomorrow is Fed day and Yellen has a decision to make. If she opts to tighten monetary policy it could threaten the 1972 level surprisingly quickly. Lets see. It will also greatly affect the US$ and therefore commodities, bullion and of course rates, particularly the 5 yr and Fitzpatrick covers below.
“As long as the SPX trades above 1972, the underlying bull trend in the US remains intact”.
Here Fitzpatrick:
And here GS:
Its always a good practice to run through GS’s high conviction trades. We can see shorts include the euro, gold and silver and the gbp at -2.
On the long side, high conviction, we see USD vs all comers, Eurostoxx50 and more controversially Brent crude.
On the Audusd they have gone neutral, as have I, for now. Fitzpatrick above is expecting more.
Covering some of the same asset allocations, I don’t have any leverage on gold and silver but i do have a position funded by US$ cash. Given how far the USD has moved and the weakening data points Ive diluted my US$ longs by purchasing gold. I’m long the Euro vs GBP and even holding some euro cash ie I don’t yet know between the two instruments, ie gold and the euro on the near term, which will prove the better asset to hold.
More reports.
Here CS’s excellent chart technical run through
CS rightly have become much more cautious on equities. They expect more weakness with multiple divergences, correct in my view.
And here CS wealth with some equity recommendations and comments across multi markets.
“All eyes to the Fed” sums it up really. Longer term the ECB will start to hit problems on lack of assets to purchase at some point during their quantitative program, most likely. 20% of German bunds are already below the ECBs yield rules for purchase. The Bundesbank is having to buy bunds further and further along the yield curve. Even the ten year, Spanish government debt, hit 1.15% a few days ago. As several commentators have noted some entity or other is going to lose a ton of capital on bonds.
And here the excellent technical indicator report care of Yardeni:
There are so many divergences here to comment on. According to historical precedents we have should have already seen a steep correction in asset markets but with central bankers so determined to either increase the money supply and or buy equities they are keeping a floor under many asset markets, for now. Historically, putting off asset price corrections via monetary meddling usually leads to a worse correction later.
And here an excellent and somewhat worrying report from JP on our previous experience of bubbles and interest raising periods.
Please read this report. I can’t run through all the slides but the divergences between prior periods and this is telling.
And here the very useful technical flows report from JP:
The ECB’s challenge of asset buying is examined. Norway’s sovereign wealth fund has been a big equity buyer once again.
Here some macro reports:
Firstly JP:
And here RBC with their usual excellent report:
And here a trio of FX reports:
First up the usual MS fx tech weekly:
Great report, as usual.I don’t agree on all but solid report.
Here HSBC on global fx
And here from the same team a good bit of research on the UK GBP situation. “Risk is not priced in, at present”. Though the process has started judging by the gbp over the last few days.
And here on commodities Commerz
And here Yardeni on Gold and its ratios.
Vs other assets gold is cheap on a historic basis eg property, bonds and equities. Vs money supply it is extremely cheap. These are indicators we all know of course but its worth being reminded.
Good luck to all. Yellen in just a few hours now.
All the best
Rich
p.s. Though i have personally bought this book and I would recommend all buy it and buy a copies for their friends and children here is a pdf copy of the great “The Road to Serfdom, with The Intellectuals and Socialism”. F.Hayek