Bulls Still in Control
Alright so I just wanted to get this one out there, its been a hell of a last 3 weeks dealing with 2 major hurricanes, evacuations, flooding and a massive 200 year year old tree being held up by my house and embedded in my attic. Anyway the debris, repairs and clean up will take months, but I guess that’s Mother Nature, always showing whose boss! Oh not to mention no power for almost 7 days!
Let’s first take a look at the settlements from yesterday and the data that we have over the last week and month:
It is apparent the US bond market has taken a reprieve from the post FOMC decision and equities continue outperform with Gold and Silver and Bitcoin the standouts over the last month. We will do a piece on Bitcoin price action next week, but for now the basic range trade there is $69k to $61k and no we are not advocates of day trading it but rather would prefer your guys look at it as a reserve asset to be accumulated at lower prices. Do not chase Bitcoin higher, if there is anything the last 13 years has proven, that is a disastrous strategy. We do have other ways to tackle that and its a bit more sophisticated but if you want to learn more just ask. Here is a quick chart of Bitcoin, its not quite above the breakout top end range but it has made a nice move off the bottom value area:
As far as equities, the Nasdaq futures continue to perform still looking to run into 21000 into the election and the bulls now have 19811 support way underneath as their initial reversal defensive position. For now the bulls seem to be in control here as positions are being compressed into an attempt at that 21k level:
Another chart we wanted to touch on, now that the ECB has cut rates, is the Euro Currency, what a great technical rejection at 112-15 area, the close below 110-28 means bears are in control here and that is our level to watch:
When we look at US bond yields we can see the nice run off the lows below 3.95% and now back up toward 4.40% a similar move from the Dec23-Jan24 time frame:
You can also see the US yield curve has maintained its shape off the lows and will be in a complete positive slope should the FOMC continue its cutting regime:
Fundamentally I think that risk is heavily tilted toward complacency. Evidence of this can be found in the spread between BBB Corp Bonds and T-Bills. This next chart shows the continuation of all that extra base money and leverage capturing and compressing risk yield spreads:
As you can tell from that chart, historically there is a snap back and generally it comes after the US yield curves dis-invert and global central banks all cut rates in unison. We are close to having all the central banks on that same page, but not yet fully. We know eventually that the same QE and monetization will be used and asset prices after a brief down move will continue their ascent. Its the same story over and over again, the only change we see now is there is a lot of backlash from the BRICs and nobody can foretell how this will actually play out. Geopolitically we can already see danger on the horizon and that is something that deeply concerns us.
Ok that is it for now, we don’t try to look to much into all of this, we hope we sparked your interest into learning more about the futures markets, how they trade, and how they can be incorporated into your overall investment future. We hope you continue to look at markets and understand them from our unique perspective and insight. Our goal is to create a mindset that looks at these complex things in a way that you may not have thought of before. We won’t undersell it, these are complex issues, full of thousands of moving parts, our goal is not to prognosticate, but rather give you sensible things to ponder and then incorporate into your own personal use cases. Anyway have a great weekend!