Whether it’s the “storm” of news this week, or August’s anxiety strewn wasteland of low liquidity, high potential chaos events, former fund manager and FX trader Richard Breslow warns, “markets are beckoning traders to come out and play” and as we wait with bated breath to see what happens, here is which way markets appear to be leaning in anticipation…
via Bloomberg,
The most glaring marker is that global bond yields all look like they want to test higher.
A “will they, won’t they” JGB market appears to be salivating to test the BOJ’s yield curve suppression strategy. If you think the 10-year Japanese yield is pushing on its ceiling, just look at the longer durations.
German bunds are doing their bit. So much so that the spread to Treasuries is in danger of tightening instead of breaking out above 260 basis points. The chart says that this is a very tradable level.
We either fail here with all of the implications it will have for relative equity and currency plays or validate the flag pattern that EUR/USD is tracing out. For a market that has been going sideways, it is showing animal spirits rather than lack of interest.
And say what you will about the U.S. 10-year not being able to get above 3%, it isn’t backing off either. And I have to say, if one more person says last Friday’s GDP number was a miss, I might be tempted to be impolitic.
Equity markets seem to be at some sort of crossroads. They have by and large traded well but look very iffy and suddenly undecided. I don’t necessarily see last week’s price action as a failure in the S&P 500 above 2825 as much as a get back to neutral before the data move.
But that remains an important pivot level that must be taken out again forthwith or be looked at in retrospect as a bridge that was too far. And that can be said for a whole range of major indices globally. It’s actually set up to be a fairly straight-forward trade as the chart points are rather obvious and not very far away.
The Bloomberg Commodity Index is valiantly trying to rally. Everyone I hear from is getting all bulled-up on oil prices again. Here’s an easy one. My pivot is only 0.25% above here. Given last Thursday’s price action, I’d be ever-so cautious thinking it is a lay-up trade.
Oddly enough, the dollar is the least interesting trade out there. I’m, temporarily, agnostic. It’s a strange way to fight a currency war. I’m a closet bull, but willing to wait. It should be higher and isn’t and that bothers me.
As Breslow concludes, this is going to be an interesting week, and there is no shortage of assets in play. This isn’t shaping up to be an old-fashioned quiet August.
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