As is customary, I am sharing some thoughts before Friday’s payroll is printed. I will dissect the data and market reaction with implications in the paid section further below. October hasn’t started easy, with plenty of cross-currents and geopolitical tensions escalating. It’s not often you see many different waves reaching our investment shores all at once. First off, Powell’s rollback of a 50 bps pace commitment made some nervous bond longs and USD shorts realize that they are possibly a bit overinvested. Despite tensions escalating and equities not really trading fantastically, bonds got whacked. With it, the tremors of overextension in other markets and commodities have come to bite a few and reduce position. You will see how the momentum model has changed its stance on bonds just as we enter tomorrow’s payroll print, which is intriguing. Many moves, however, are simple oscillations from extended prints and needed a breather like our own reversal model had anticipated.
I am no geopolitical specialist and I will leave it to Macro D further below to opine, but markets generally brush off those events as long as it doesn’t trigger major macro chain reactions. The Ukraine / Russian war was one of those events where many global supply issues were exacerbated just as we were ramping inflation. The clear implication here is its effect on oil, which has been appreciated sharply. Can it go higher? Sure thing, but I would hold no edge over such an outcome. Fade panickers out there is my only advice, and be nimble.
The Chinese stimulus was given a “meh” by many, but I took it as a good indication that there is probably more to go, and I was right about that. Charts help us identify exhaustion indicators, and you will see more about this further below.
ECB and SNB members are talking about ZIRP and negative rates again. Damn it, can it be? Look at Swiss inflation, which is undershooting spectacularly. Europe, usually, is not far behind. Even the BoE (Bailey interview) is now ready to go faster than is usually necessary. This was then reversed by Huw Pill’s talk on Friday morning. Talk about a divided committee.
The new Japanese PM Ishiba, meanwhile, is causing the JPY to weaken again as he opined that there is currently no need for the BoJ to hike rates again. This is at odds with their monetary institution. It’s not a good mix, and again, overcrowded JPY positions got a whack, although, on Friday morning, he reversed some of those comments.
What other crowded positions are out there? Imagine a 200+ NFP tomorrow; those positions would see an accelerated unwind, so better watch out. If you are running tons of risk, I would look for such an eventuality, although I wouldn’t advise any knee-jerk reactions after one data point alone. Nervousness is on the rise, so I take note.
I would urge everyone to thoroughly study the charts this week as they are whispering the forthcoming changes to us. Stay vigilant and nimble. These are not easy-to-navigate times.
By now, most of you will be familiar with the models and their signals. If not, please study the guide I have published. I would highly recommend you go through these notes and guides if you are new to the pack.
Further below, the full book of 250+ charts covers the whole asset spectrum from equities, bonds, commodities, FX, and Crypto to give you the most extensive view. On average, it will generally provide a good 5-10 set-ups on a weekly basis.
A reminder that you can now also use my models in TradingView scripts, which I made available for subscribers to use on their charts for a fee. If you are interested, ping me an email with your TV username. Note that only paying subscribers will be granted access. No exceptions. It’s taking time to set everyone up so I will limit the amount of users going forward.
Let’s also read my friend Macro D’s recent thoughts on markets before engaging our scanning eyes across the multitude of charts that I have updated for you below. But first, let’s dive in a bit more on where bonds and curves are likely headed next.
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