International markets traders banter

[skc]

US market at a key juncture now.



Back in September with ES ~1900 level, I remember telling myself "Don't short now, it will most likely retest the level where it broke down".

Well, 2040 was the that level... and we are right there. It means we are only 5% down from all time high.

The question is:

1. Do you short the market now?
2. Do you wait for a reversal back below 2000?
3. Do you wait for the Fed meeting on 27/28 Oct?

It feels like no one trust this rally (as indicated by everyone panicking on the first sign of it ending back in late Aug), yet everyone still want to be part of it. Sort of like you have to keep dancing as long as the music is playing.

 

[Logique]

Yes a very interesting juncture for the SPX. The run up this month has been so rapid, you'd think that gap would need to be filled in technically i.e. ST rollover of some degree.

I'm still afraid of a Bear trap here. I mean, what have the FOMC done but kick the can down the road on interest rates.

 

[CanOz]

SKC, the question is how to play the break, if it shall occur....

I have some ideas...

For 1, it's quite likely that when a break higher or lower occurs, it will be during the globex hours. Generally though it would be the Retest where you could look for enough information to take a position....

Love to post some volume profile charts to show where all the volume has been done at....unfortunately I'm sick in bed with severe food poisoning....maybe later today.

CanOz

 

[CanOz]

The second thing to watch for here I reckon is a fundamental news event to trigger selling....or buying. It's always places in time like this where markets always seem to be positioned poorly for absorbing news....

 

[CanOz]

Well, I think we could see another drive higher, ideally into 2050. Shorts under 2000 though....definitely running out of steam here though.

Edit, sorry logique, wasn't my intention to exclude you when I replied...

 

[sinner]

1. Do you short the market now?
2. Do you wait for a reversal back below 2000?
3. Do you wait for the Fed meeting on 27/28 Oct?

Tom McClellan who has been doing a pretty good job at calling turning points latest weekly note
http://www.mcoscillator.com/learning_center/weekly_chart/mcclellan_oscillator_interpretation/

Now we are in a downtrend, and the countertrend rallies have been able to take the Oscillator up to a level which would otherwise be an indication of strong new upward initiation. But the lack of follow through reveals those high readings to be markers of blowoff tops instead of strong new initiation. The latest Oscillator peak rose all the way up to +303, and we thus far are not seeing follow-through.

If the Oscillator continues falling and goes back down through the zero line without building any complexity up above zero, then that will be a “tell” that the recent bounce has been just a countertrend rally, and is not the start of a new uptrend. That is the outcome which I expect to see, and so the Oscillator serves as a great tool for confirmation of expectations.

It feels like no one trust this rally (as indicated by everyone panicking on the first sign of it ending back in late Aug), yet everyone still want to be part of it. Sort of like you have to keep dancing as long as the music is playing.

Well, there are not very good indications of positive investor risk sentiment across the board. Normally bull markets have strong uniformity across those indicators since, generally speaking, when investors are willing to take risk, it shows up everywhere.

A new rally to all time highs without supportive increases in preference for risk would only broaden those concerns rather than alleviate them and I'd be adding significant hedges on such a move, perhaps even enough to produce a modest net short position.

Shifts in trendfollowing and breadth measures towards a more positive indication would be my personal signal to adopt a 70-100% net long. Valuations remain too elevated in the markets I track for me to adopt a leveraged bullish stance.

FWIW my current exposures at the asset class level from last nights mark-to-market, which under the current volatility regime is getting rebalanced about once a month (next rebal coming up shortly but I don't anticipate any major shift):


EDIT: it says cash/bonds but it's mostly cash with a smallish amount of AU gov bond exposure (5-10y).

 

[kid hustlr]

what currency is the gold in

 

[sinner]

what currency is the gold in

Everything is marked to the AUD value using the latest NY closing price for the appropriate FX cross. In the case of gold it's the NY close for XAUAUD.

99% of the gold is physically held by me or held in AUD denominated allocated accounts.

 

[sinner]

Here's just one small study of investor risk sentiment, the S&P Global 100 priced in various currencies and trend:

* SP Global 100 priced in USD, currently below 52 week SMA
* SP Global 100 priced in JPY, currently below 52 week SMA
* SP Global 100 priced in EUR, currently below 52 week SMA
* SP Global 100 priced in CHF, currently below 52 week SMA
* SP Global 100 priced in GBP, currently below 52 week SMA
* SP Global 100 priced in AUD, currently above 52 week SMA
* SP Global 100 priced in CAD, currently above 52 week SMA

 

[CanOz]

The Dax and the eurostoxx are diverging again....

 

[Valued]

It's not just the US market at an interesting turning point. Other weaker markets are in similar technical positions but arn't experiencing high growth like the US.

It's a tough one since on one view the world markets are doing better than the world economy suggests that they should. The US has pretty good growth but other countries are doing it tough. On the other hand, bull markets can just run and run even if the fundamentals don't necessarily support it and at some point also the fundamentals may catch up with the market if economic recovery catches up (I believe that's outside standard academic theory, it's just my belief on how markets work). If that happens then we won't see a bear market, we may just see the stock markets around the world stagnate for a bit, unless there is something wrong specifically with the country (such as Russia because of sanctions and low oil price).

I guess that's the problem with trying to capture a big move right now. No one seems to know wtf is going on. For every economist that says the world is coming to an end, buy gold, there is another that says we are going to recover.

 

[sinner]

I guess that's the problem with trying to capture a big move right now. No one seems to know wtf is going on.

Short term, for those putting actual money on the table, it's all a coinflip. Nothing new there.

Long term, I think it is obvious that passive returns for most asset classes at current prices will be lower in the future than the past. This might be a matter of contention for equities but it is not so for bonds, where the nominal return is essentially locked in at current low yields. You won't hear any experts or analysts calling for a doubling of the global equity market in the next 5 years (and if such an event took place it would be on the backs of something very inflationary rather than healthy growth driven). At least from my perspective, the exception here would be gold but I am aware of being in the minority on that.

The current business model driving prices higher is essentially that of decamping, with businesses returning capital to shareholders at staggering rates. Investment in the future, especially future growth, is muted or going backwards. Economists everywhere have been forced to revise growth targets down every year since the GFC as the mirage evaporated. So big moves higher from here will really only widen existing divergences, otherwise the capital markets and capitalism more broadly are simply broken.

This obviously sounds all very gloom and doom, but I am not bearish against humanity. I think plenty of opportunity will abound for traders and investors alike, especially given the prospect of lower equity prices and higher interest rates. But until then, it is what it is.

 

[Trembling Hand]

So big moves higher from here will really only widen existing divergences, otherwise the capital markets and capitalism more broadly are simply broken.

This obviously sounds all very gloom and doom, but I am not bearish against humanity. I think plenty of opportunity will abound for traders and investors alike, especially given the prospect of lower equity prices and higher interest rates. But until then, it is what it is.

Trading is in a sweet spot from here to eternity (that's measured in trader lives which are very short ) heap of uncertainty and a heap of cash looking for a return.

Humanity and investors needs a real disruptive boom. Not a funny money one. Couple of hopes/wishes along the lines of renewables boom, African boom based on corruption reduction and investment not aid, china shift to consumption and spacemen bringing new peaceful technology and cool flying cars.

(Last one the most probable)

 

[sinner]

Looks like some big EUR volatility today, not too many days over the last 5y with this kind of single day return (although obviously today isn't finished yet).

At least, I'm attributing EUR since JPY, AUD and GBP didn't weaken as badly against the USD (although JPY did move a fair chunk).

 

[sinner]

I look at a lot of charts, looking to understand the returns for concepts and so on. A lot of charts.

Often this means I will recognise the return profile for a particular strategy which turns out to be driven by another factor.

Tonight I found a rather interesting, new to me, relationship.

Below is the ratio chart for NYSE ETFs TIP and IEF. Their duration is pretty closely matched so the chart can be considered a crude proxy for 7y market implied US inflation expectations.


Does this look familiar to you? As soon as I saw it, it looked pretty familiar to me. Here are a few comparison charts

TIP/IEF vs WTI cash (Brent cash looks identical)


TIP/IEF vs Goldman Sachs Commodity Index cash (heavily weighted to WTI)


TIP/IEF vs EURUSD


TIP/IEF vs AUDUSD

 

[sinner]

TIP/IEF vs Gold in USD (XAUUSD)



TIP/IEF vs JPYUSD


This last one is pretty interesting, you can see JPYUSD leading the ratio by about 2 months lead, from 2011-2014.

 

[skc]

US market at a key juncture now.

Back in September with ES ~1900 level, I remember telling myself "Don't short now, it will most likely retest the level where it broke down".

Well, 2040 was the that level... and we are right there. It means we are only 5% down from all time high.

The question is:

1. Do you short the market now?
2. Do you wait for a reversal back below 2000?
3. Do you wait for the Fed meeting on 27/28 Oct?

It feels like no one trust this rally (as indicated by everyone panicking on the first sign of it ending back in late Aug), yet everyone still want to be part of it. Sort of like you have to keep dancing as long as the music is playing.

Haha... let's try this again.



We are now ~3% off all time high. What I left out in the question set was 4. Punch higher!

FWIW, I actually took option 1 and shorted at around 2038. I closed the position before Mario spoke to avoid the volatility and pocketed a small profit. Then for some reason I went to bed instead of going long...

With Google and Amazon reporting well after market, it should be another strong night. Then I guess it's likely consolidation until the Fed meeting...

 

[Valued]

skc, your trend lines are amazing lol.

I am still watching this closely. I am waiting to see what happens tonight. I am interested in what the volume is going to be since it looks like volume was cooling off on the rise up yesterday. If it is even less impressive after tonight then congestion or a fall are the most probable. The problem with a large move down right now before any fundamental news is that earnings reports have been positive and the market has reacted like a charging bull. Google shares are up 10 - 12% based on 5 billion dollars of share buy backs and slightly more earnings. I am not sure that is worth over 20 billion dollars but apparently it is.

Time will tell. We will know a little more tonight and a lot more by the end of the month.

 

[PennD]

Feeling toppy?

http://safehaven.com/article/39338/...rket-well-2015-is-looking-a-lot-like-20072008

 

[Logique]

Well, I think we could see another drive higher, ideally into 2050. Shorts under 2000 though....definitely running out of steam here though.

Edit, sorry logique, wasn't my intention to exclude you when I replied...

Hey no sweat CanOz