Depending on where you look, Q4 has started off magnificently (Dow, Argentine Peso, BTP shorts) or dismally (US Small Caps, China, Euro) and amid low vol and high dispersion, former fund manager and FX trader Richard Breslow notes that everyone is hoping to latch on to some theme that will give a tradable trend to take us home for the year.
Actually, we should always be on the prowl for such a thing. But the need seems more acute than usual.
The problem is trends happen for a reason and don’t happen as a matter of convenience. It’s fine to think big, but you have to be realistic at the same time. And be very wary of cherry-picking the news items that suit, because the market may have a different list.
Via Bloomberg,
When in wishful thinking mode, it’s even more important than usual to ground yourself in the technicals. They are the only thing you know that won’t lie to you. And even if you are swinging for the fences, it doesn’t absolve you of the responsibility to put in the effort to take the low-risk opportunities that present themselves. You don’t have to be skint to pick up a dollar you see lying on the floor.
We’ll see what Friday’s non-farm payrolls report brings. The experts tell me not to expect any huge surprises.
And comments from Fed Chairman Jerome Powell yesterday may have made any outlier result less worthy of momentary panic than usual. His reaffirmation of everything he has been saying left us, not surprisingly, right where we have been for the last two weeks. Yet most of the people I talk to remain bearish. It’s a well-defined trade, whatever your view. May’s high yield at 3.126% is up top and 3% sits below.
If I was forced to trade it, I’d do it off my view of Italian assets. Path of least resistance versus safe haven.
Whether you look at the various dollar indexes or the component parts, the currency trades well. But it’s running into a lot of resistance levels. This may be the most interesting asset to watch because how it does up here could very well determine what happens to everything else. This is one where a breakout just might not be another false dawn like in August. I doubt we need to wait for the Treasury’s currency manipulation report to get our answer.
Equities continue to do nothing wrong. Although it’s fair to note that the S&P 500 has done nothing for two weeks. Keep an eye on the Russell 2000 which may be attempting a double bottom with today’s futures low matching that of July 30. The recent Russell sell-off may have been troubling the bigger caps but support is right here. I must say, if a decline of 5% doesn’t have broader repercussions, it’s very impressive.
Brent crude is grabbing lots of headlines for its current move. WTI looks somewhat more ambiguous. Both appear to be at a crossroads at current levels. And current prices don’t look stable. Treat these nimbly.
Italy is all about headline risk. But the Italian stock exchange’s MIB index, too, has decent technical levels.
Yesterday’s low lined up well with previous lows. Despite the news, we aren’t in uncharted territory. On the top side watch 21080, where Monday’s rally failed exactly where it should have.
The news is murky and caustic, but the charts couldn’t be clearer.
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