Fundamental Analysis: 3/23-3/28
Nov. 25th Fundamental & Geopolitical Report
We’ve had a contrast this week in terms of risk on—risk-off in terms of sentiment. The US indices hit multiple all time-highs, which carries a major impact regardless of where you’re at in the world and your current diversification of which assets. There is a significant of influence when it comes to the economic calendar, which drive the key underlying economic theatre. It’s not technical right now—it’s not even fundamentals—it’s the market conditions. As the expectation of a liquidity drained into the next few sessions this week, including major players being offline Thursday and Friday, is that some distorted moves could very well happen.
Major highs have been achieved between the DOW and the SPX this week, with the SPX not posting an intraday record high, but a record all time high close which carries the same weight. When a major benchmark like this gets put on the radar of so many retails and intuitional firms alike—with the addition to motivation from the white house, it generates its own momentum further fuels by the algos that do run-online. This momentum will be of struggle though, don’t discount that. Yesterday we say both the SPX and DOW attribute risk-on up flows, including the NIKKE25, Euro equities like FTSE and DAX—although lesser—all showed positive inflows going into the holidays.
Even the commodity markets like copper and crude oil stole some gains, pushing to high not seen since March. All of these advances marked clear month highs, and on clearance of a long-winded extension. EEM (emerging markets) has pushed to a new high also. This appears to be the technical cue for more of a systematic move.
The Problem.
The current conditions behind the scenes is one that may come short when it comes to follow through. This simply means volatility and the significance of its current wave. Keep in mind, historically this is one of the slowest weeks for international finance. However, you can have some incredible moves, almost adagios to a tsunami in a quiet—unaffiliate market. It can be difficult however having follow through.
When volume drops off, a continuation of a trend won’t be as easy. It’s easy to trigger volatility but it’s rare in late Nov. to get a follow through. Volatility drops, markets outperform, and the VIX also drops. However, a tad of volatility in a thin and high spread market can create huge moves that can be very profitable if you are playing.
To get a follow through or a trend at these kind of levels in the Equity Market’s (stretched for a speculative exposure) in a thin liquidity period, there are many things that can go wrong in terms of risk. There’s not as much of an opportunity to handle any profit in trends should you get in late, vs what can happen when the trade goes wrong?
Fear doesn’t wait. greed is hesitant. Right now, I’m more interested in the tension of a breakout for the U.S. dollar. Unlike the SPX, the dollar index is looking at a break that only put’s it back into a very…very large range. It’s much easier to stick in a range than form a trend, which makes sense. these are forms of value we’re speculating on. The dollar could be on the verge of a breakdown on the daily timeframe. This has a lot of alignment to the dollar-based majors, EUR/USD at 1.19, but more notably is 1.20. However, this will be a tuff 100 pip zone oof resistance that will try to put a downside break on hold.
-GBP/USD: 1.34, a multiyear trendline going back to the peak prior to BREXIT, stands strongly above at the 134 range.
-AUD/USD: Backing up to multi year highs, we can see it’s a risk-oriented major right now.
-NZD/USD: With the RBNZ’s refusal to entertain a more accommodative policy—which was expected—is in a similar situation. The interest is in the improvement in trade relations, as the transition between TRUMP 44 to BIDEN 45 takes place. There is a fundamental addition catalyst larking in the water.
In the meantime, we have scheduled even risk over the next 2 days of trade. The US docket is loaded—with good US PMIs and a disappointed consumer confident print, followed by durable goods, trade balance, initial jobless claims, and personal spending all due this week. I will be watching initial jobless claims most closely, but I don’t think this will override the liquidity –and lack there off—as mentioned above, however you never can say you know anything in this market!! This could cause a bounce of the DXY or a break, I just won’t be very confident in what is to come in terms of follow through. Even the suggestion for the transition is verified by Georgia and Michigan and Pensively, more realistic things that has attributed to the market sentiment is that Janet Yellen could possibly be the next treasury secretary. This would insulate more stimulus, and this time it could be both fiscal and monetary policy stimulus. So this is personally what I’m interested in specifically right now. This would only buffer further risk trends. Question is, can it solve an empty hole in investors hearts looking for –and have no found—true value? It’s a systemic question.
PS: Watch the broader indicines and the amount of outflows from the tech sector of the DAQ.
We’ve had a contrast this week in terms of risk on—risk-off in terms of sentiment. The US indices hit multiple all time-highs, which carries a major impact regardless of where you’re at in the world and your current diversification of which assets. There is a significant of influence when it comes to the economic calendar, which drive the key underlying economic theatre. It’s not technical right now—it’s not even fundamentals—it’s the market conditions. As the expectation of a liquidity drained into the next few sessions this week, including major players being offline Thursday and Friday, is that some distorted moves could very well happen.
Major highs have been achieved between the DOW and the SPX this week, with the SPX not posting an intraday record high, but a record all time high close which carries the same weight. When a major benchmark like this gets put on the radar of so many retails and intuitional firms alike—with the addition to motivation from the white house, it generates its own momentum further fuels by the algos that do run-online. This momentum will be of struggle though, don’t discount that. Yesterday we say both the SPX and DOW attribute risk-on up flows, including the NIKKE25, Euro equities like FTSE and DAX—although lesser—all showed positive inflows going into the holidays.
Even the commodity markets like copper and crude oil stole some gains, pushing to high not seen since March. All of these advances marked clear month highs, and on clearance of a long-winded extension. EEM (emerging markets) has pushed to a new high also. This appears to be the technical cue for more of a systematic move.
The Problem.
The current conditions behind the scenes is one that may come short when it comes to follow through. This simply means volatility and the significance of its current wave. Keep in mind, historically this is one of the slowest weeks for international finance. However, you can have some incredible moves, almost adagios to a tsunami in a quiet—unaffiliate market. It can be difficult however having follow through.
When volume drops off, a continuation of a trend won’t be as easy. It’s easy to trigger volatility but it’s rare in late Nov. to get a follow through. Volatility drops, markets outperform, and the VIX also drops. However, a tad of volatility in a thin and high spread market can create huge moves that can be very profitable if you are playing.
To get a follow through or a trend at these kind of levels in the Equity Market’s (stretched for a speculative exposure) in a thin liquidity period, there are many things that can go wrong in terms of risk. There’s not as much of an opportunity to handle any profit in trends should you get in late, vs what can happen when the trade goes wrong?
Fear doesn’t wait. greed is hesitant. Right now, I’m more interested in the tension of a breakout for the U.S. dollar. Unlike the SPX, the dollar index is looking at a break that only put’s it back into a very…very large range. It’s much easier to stick in a range than form a trend, which makes sense. these are forms of value we’re speculating on. The dollar could be on the verge of a breakdown on the daily timeframe. This has a lot of alignment to the dollar-based majors, EUR/USD at 1.19, but more notably is 1.20. However, this will be a tuff 100 pip zone oof resistance that will try to put a downside break on hold.
-GBP/USD: 1.34, a multiyear trendline going back to the peak prior to BREXIT, stands strongly above at the 134 range.
-AUD/USD: Backing up to multi year highs, we can see it’s a risk-oriented major right now.
-NZD/USD: With the RBNZ’s refusal to entertain a more accommodative policy—which was expected—is in a similar situation. The interest is in the improvement in trade relations, as the transition between TRUMP 44 to BIDEN 45 takes place. There is a fundamental addition catalyst larking in the water.
In the meantime, we have scheduled even risk over the next 2 days of trade. The US docket is loaded—with good US PMIs and a disappointed consumer confident print, followed by durable goods, trade balance, initial jobless claims, and personal spending all due this week. I will be watching initial jobless claims most closely, but I don’t think this will override the liquidity –and lack there off—as mentioned above, however you never can say you know anything in this market!! This could cause a bounce of the DXY or a break, I just won’t be very confident in what is to come in terms of follow through. Even the suggestion for the transition is verified by Georgia and Michigan and Pensively, more realistic things that has attributed to the market sentiment is that Janet Yellen could possibly be the next treasury secretary. This would insulate more stimulus, and this time it could be both fiscal and monetary policy stimulus. So this is personally what I’m interested in specifically right now. This would only buffer further risk trends. Question is, can it solve an empty hole in investors hearts looking for –and have no found—true value? It’s a systemic question.
PS: Watch the broader indicines and the amount of outflows from the tech sector of the DAQ.
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