Another week rolls by with sp500 price at almost the identical level she closed at the week before. Volatility has risen a little however with a reversal price bar but no follow through as yet. Lead cyclicals like transports, soxx, tech and finance either not achieving much change or slightly down. World indexes are also down generally on the week with the exception being the European indexes that are generally higher due to the eurusd issues as below.
Today the price action however has potentially thrown a curve ball here and its meaning needs to be considered, digested and acted upon. The issue for macro allocators, after today, is the DXY, across the major crosses vs the usd but especially the eurusd. The next few days will seal the near term trend for the DXY and this trend is always meaningful for all risk markets.
There are some indications emerging here that, across asset markets whether that be equities or currencies or commodities, we seem to be ahead of where we thought we would be at this point in the calendar. With the implication that we are closer to the end of wave 5 than we previously thought.
The prior cftc report showed the positioning for some more euro strength and at least a test to regain the prior price resistance levels given the prior momentum. Having said this many other major pairs were already showing a change of trend like the usdsgd and usdcad audusd etc. The pressure was on the euro today and it failed. This cyclically raises all sort of questions for commodities or the inverse correlations to the US$. It also brings forward the Fitzpatrick and UBS team’s projections for a renewal in US$ strength. It also may provide more fuel to european equities to extend their tactical gains whilst providing a headwind to US cyclical equities. Also meaningful for US$ peg risk markets like the Hangseng.
Having said the above here the Swiss team’s latest:
Note their projections for the DXY and note the closing of the spread between the 2 and 10 yr treasuries. If she closes too steeply we will get a reaction across risk, guaranteed.
Here GS with a few of their most recent CTM weekly reviews (A big thank you to our contributor for the updates) :
And here last weeks cftc review.. though note another release tomorrow (but pre today’s significant fx moves).
Was a busy day today juggling FX as the day ran on. If you run multiple positions being sufficiently quick to react to events is a key challenge. If this is the start of a renewal of US$ strength my book is over allocated commodities and US$ assets and euro cash. The re-balancing is in process but today’s move was fast it only allowed a handful of trades before price became so over bought trades were unwise. Tomorrow is another day.
Here Miesels
Here showing the trend levels eurusd (in just one day the level has got much closer)
Currently working at my home in the mountains between Spain and France. Beautiful autumn days here which i look forward to enjoying this weekend. Where ever are have a great week guys.
All the best
Rich