Monday, April 06, 2020

 

Dear Reader,

 

Please find below our latest Weekly Trend Update Report covering major asset classes and currencies.

Please note that our upload server (in Singapore) is down and that we could not update files and pictures as a result.

We created a Dropbox links for Friday’s snapshot and the Global Chartbook.

Have a nice week ahead.

 

Marc Bentin

Bentinpartner GmbH

       


 

Trend Status Update

 

Last week saw a jump of 6.6mn US jobless claims, bringing the 2 weeks change to 10mn, the steepest decline since the great depression. At the same time, over the past week the Federal Reserve increased its balance sheet by USD557bn, bringing the 5 weeks change to USD1.6bn (and much more in the pipeline), buying aggressively US Treasuries, agencies, corporate bonds and ETF’s on those and commercial paper, leaving aside, presumably and for now, stocks and high yield bonds.

After expanding international swap agreements, exchanging USD for foreign currencies (cross currency swaps now suggest the desired effect was reached), the Fed announced last week a new program allowing central banks to borrow against Treasuries held in custody at the New York Fed in a supplementary effort to boost liquidity and prevent further selling by foreigners of US Treasuries which were reported last week to have dropped by USD109bn in March (mainly countries dependent on oil exports).  This did not prevent the USD to gain further as concerns remained about EM denominated debt being as high as USD5.8trn and constituting a so called synthetic short USD position from this part of the world.

The dollar also gained with more speculative interest (from COMEX) being wrong footed and outright long EUR since a few weeks ago (after being short) and now taking the proverbial salon door on their positions (as the euro declined).

On Friday, the US job numbers came much worse than expected with a 701k (from -100k expected) bringing the unemployment rate to 4.4%. Unemployment for April is expected to jump to 12%.

 

 

Over the past week, the S&P500 sold off by -2,1% (-22,9% YTD) while the Nasdaq100 dropped -1,0% (-13,8% YTD). The US small cap index sold off by -7,1% (-36,9% YTD). CBOE Volatility Index sold off by -28,6% (239,6% YTD) to 46,8.

Tech traded in disperse order. AAPL dropped by -2,6% (-17,8%). FB dropped -1,7% (-24,9%). LYFT sold off by -20,3% (-48,9%). AMZN gained 0,3% (3,2%). NFLX gained 1,3% (11,8%). GOOG dropped -1,2% (-17,9%). MSFT rallied 2,8% (-2,5%). INTC rallied 3,4% (-9,6%).

Banks remained the weakest spot along with real estate. XLF (FINANCIAL SELECT SECTOR SPDR) sold off by -6,5% (-36,2%). EUFN (ISHARES MSCI EUROPE FINANCIA) sold off by -10,3% (-40,8%). XHB (SPDR S&P HOMEBUILDERS ETF) sold off by -13,5% (-41,8%). IYR (ISHARES US REAL ESTATE ETF) sold off by -8,5% (-31,0%).

Airbnb said that its valuation which was last estimated to be worth USD40bn at the end of last year is now closer to USD26bn, adding that it had lost USD400mn in the period “preceding” the corona virus outbreak. Some of these unicorns will never hit the IPO stage and might be months or weeks from an existential crisis as well. For what it is worth, last week the FT reported that “some of the most powerful groups on Wall Street are pressing the Trump administration to allow private equity-owned companies to access hundreds of billions of dollars in loan funds earmarked for US small businesses hit by the coronavirus pandemic… Congress last week authorised the Small Business Administration to dispense $350bn worth of rescue loans to companies with fewer than 500 workers that have been affected by the coronavirus pandemic.”

On the other hand of the performance spectrum and for a change, energy outperformed on the back of late last week’s oil price squeeze. RSX (VANECK RUSSIA ETF) rallied 9,5% (-28,8%). XLE (ENERGY SELECT SECTOR SPDR) rallied 5,3% (-50,3%). Health care also outperformed; LV (HEALTH CARE SELECT SECTOR) rallied 2,1% (-14,8%).

The Eurostoxx50 dropped -2,0% (-28,4%), outperforming the S&P500 by 0,1%.

Diversified EM equities (VWO) dropped -0,7% (-26,5%), outperforming the S&P500 by 1,3%.

 

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies rallied 2,1% (5,1%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,9% (-6,6%).

EM FX performance was weaker with ZAR trading worst while RUB managed to gain, supported by a recovery in oil prices on which MXN could not capitalize however.  USDBRL rallied 4,9% (32,9%). USDRUB sold off by -3,0% (23,6%). USDMXN rallied 7,2% (32,2%). USDINR gained 1,8% (6,7%). USDCNY dropped -0,1% (1,8%). USDZAR rallied 8,0% (36,0%, Z-score 2,1). EURUSD sold off by -3,1% (-3,7%).

 

10Y US Treasuries rallied -8bps (-132bps) to 0,59%. 10Y Bunds climbed 3bps (-26bps) to -0,44%. 10Y Italian BTPs underperformed rising 22bps (14bps) to 1,55%, underperforming Bunds by 9bps. Morgan Stanley recently estimated the US deficit will total at least $3.7trn in 2020 and an additional $3trn in 2021, suggesting a nearly $5trn extra deficit spending in the next two years, financed by the sale of Treasuries, largely to the Federal Reserve.

US High Yield (HY) Average Spread over Treasuries climbed 21bps (606bps) to 9,42%. US Investment Grade Average OAS dropped -10bps (173bps) to 2,74% as intervention pressure intensified. M. El Erian argued over the week end that Falling Angels (downgrades from investment grade to high yield) would remain a feature of this crisis as the economy slows and as the number of credit downgrades has never been that high. This is what the logic of free markets would dictate but the Fed’s plan to underwrite credit markets has changed all that and the last thing the Fed wants is to see a further deterioration in these markets. Recent Flows and the price action on LQD (IG investment grade ETF) best illustrated the safeguarding efforts of the Fed and the squeeze it enacted on this ETF that was on the verge of failing after trading with a discount as large as 7% to NAV, with investors trying to hedge or speculate on the risk that M. El. Erian highlighted.    

In European credit markets, EUR 5Y Senior Financial Spread climbed 19bps (79bps) to 1,31%.

 

Gold dropped -0,5% (6,8%) while Silver dropped -0,6% (-19,4%). Major Gold Mines (GDX) rallied 2,4% (-14,8%).

 

Goldman Sachs Commodity Index rallied 4,8% (-37,9%). WTI Crude rallied 31,8% (-53,6%). DBA (INVESCO DB AGRICULTURE FUND)sold off by -4,8% (-18,8%).

 

Over the week end…

 

After rallying more than 30% from their lows late last week, oil retreated by 6% (also taking MXN down with it) this morning after the planned OPEC+ meeting was delayed and tentatively scheduled for Thursday. The bone of question must be the US so far refusal to participate to a global effort to resorb the global oil savings glut, initially triggered by a spat between Russia and Saudi Arabia to cut supply but structurally caused by the US relentless grab of market share from OPEC+ over the past 5 years. If the US is part of the of the problem, it must be part of the solution…and that is (most likely) why the “done” deal presented on Friday to have OPEC+ reducing supply by 10mn bd will have to wait until till Thursday. Specialists also argued over the week end that to avoid “real” prices to return to where they were in practice (around USD10/barrel), supply should be curtailed by 15 or even 20mn/d barrel.

 

Still, US futures rallied 3% overnight, holding a defiant stance. This move may create an impression to start the week but does not seem totally substantiated. There was some good news on the corona front with less cases of death reported in Italy and New York (for the first time) but the news flow was mixed at best. More cases were found in Singapore (biggest daily increase in new cases) and Japan after a spike hinted at the possibility of a national state of emergency being declared as early as tomorrow to impose broader lock downs. UK Prime Minister was admitted to hospital yesterday which created a small dip in GBP.  There are about 48k averred cases in the UK with more than 4k deaths and an unusually high mortality rate.

 


Trend Score Card

 

 

 

 

Click here for technical annotations.

 

 

Trend Scorecard   

 

 


US & International Equities

Check out US and International Stocks’ Technical Trend Status.

 

 

Stocks   

 


Sector Trend & Momentum

Check equity sectors’ trend and performance …and when they break out!

 

Sector Analysis   

 

 


Fixed Income

Check out 10Y US Treasury and Bund yields, their trend, expected Fed rate moves and speculative positioning in 10-year Treasury Futures.

 

Fixed Income

 

 


US Recession Risk Radar

A comprehensive list of economic indicators to compare the current situation with previous recessions.

 

US Recession Risk Radar

 

 


The Dollar

Check out where the Dollar stands Trendwise and Breakoutwise vs. G7 and EM counterparts.

 

The Dollar

 

 


Precious Metals

Check out where precious metals stand Trendwise and Breakoutwise. Get a sense of options (cumulative open interests on calls and puts) and futures traders’ sentiment (non-commercials open positions).

 

Precious Metals

 

Check out how precious metals, the dollar and the Stock market correlate with each other and speculative futures positioning on Gold and the Dollar.

 

Gold vs. USD vs. SPX

 

 


Why Trend Following Matters and How It Can Help You?

 

A disciplined and rule-based trend following investment approach can serve as an effective portfolio insurance technique.

 

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BentinPartner GmbH is a Swiss registered independent financial adviser. We offer four different portfolio management mandates:

 

- The “Global Strategic” (GS) mandate invests your portfolio according to an optimized strategic benchmark. This allocation delivers the “beta” (or markets related) performance of your portfolio while we seek to generate additional “alpha” (“skills related) performance with tactical adjustments, using a predefined maximum “value at risk” envelope. Most of the portfolio’s performance is derived from the strategic Benchmark (beta).

- The “Global Tactical” (GT) mandate invests your portfolio without tracking a strategic asset allocation (or benchmark) and pursues a “total” as opposed to “relative” return objective. With this mandate, we seek to beat the best of “cash” or of the MSCI World Equity index, applying mostly tactical considerations, using a predefined maximum “value at risk” envelope and targeting not to exceed a predetermined overall portfolio volatility.

- The “Trend/Momentum” (TM) mandate, builds a diversified “All Weather” investment portfolio and applies a rule-based Trend/Momentum methodology to adjust this “trend neutral” allocation. We track trends across asset classes on a daily basis and adjust your portfolio in a semi automatic (there is always a pilot in the plane) fashion applying trend changes signals.

- The “Currency Overlay” (CO) mandate seeks to generate “alpha” applying a currency overlay with a limited leverage (not exceeding 100% of NAV). You control the portfolio allocation (which can be a pool of cash, stocks, bonds or gold) and we manage in overlay the FX exposure of your portfolio, seeking to add a total FX return of 4% to 7%.

 

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