Another week roles past and we have recorded, with 7 up-days in a row, the longest winning streak since September 2013. Tactically, the recent rally has been near vertical and many sectors are starting to look exhaustive in the near term again. Playing for short term pull backs is dangerous thing to do in such a strong market but having said this price is true at present so tactically if you have the time these tactical moves can be taken. On the near term the break out defensives (IDU) of their recent range is suggestive of a coming tactical pull back in the cyclicals.
US$ remains a hold as the Euro pushes lower again but momentum on the longer time frame is fading here so a profit point is likely coming at least on a tactical basis.
Here the Swiss team’s latest:
And here Fitzpatrick’s latest:
Note the forecast on the Euro.. Certainly on the macro side political risks are coming to the Euro in 2017. He’s been dead right on copper’s recent strength, if a bit early in calling it, so another hats off to Fitzpatrick.
V2 additions here:
SC with their fx run through
Many FX pair have started to chop up a little. It remains US$ biased but the strength appears to be fading at least for now. Whether we have a dollar top already in here it remains to be seen. Macro wise, the Euro remains the major constituent of the dollar basket index and there is great uncertainty across Europe due to elections and greece as well as Brexit. Its possible much of this is already priced in but shocks are certainly possible and given participants dollar biased it wouldn’t take much negative news flow to add to dollar longs and push the euro lower. Dollar bias but with weaker conviction and therefore position size seems wise to me.
Here Scotia on bullion
Bullion is heating up albeit within this current price area, likely capped by the 200dma which is now very close. TIP remains a key correlation and has broken out which is potentially meaningful. Global inflation must be watched in addition to US inflation. Any US$ weakness would add into the bullish mix.
Reits are not the place to be in an inflationary period, however with the recent breakout in defensives and with cyclicals looking very extremely over bought as well as the sgd looking to have to based and have more upside ie 1.38 to US$, breaking out vs US$ as Fitzpatrick forecast. The allocation to s-reits can produce a decent sgd income at significant discount to navs in many cases. Vs US reits and UK reits they look relatively cheap to me although i did allocate when prices were a lot lower but that doesn’t mean they aren’t an entry now.
I”ll update this table for 1stof March but the maths is self evident. The Singapore 10yr is clearly important here. She remains in her recent range for now at 2.35% or so. Ideally we dont want to see that breakout for a defensive rebound to sustain. If you are cautious allocate small an to low net debt s-reits.
I hope all are enjoying this run. almost daily new record highs on the book of assets it seems as inflation beds in.
All the best
Rich