Monday, March 30, 2020
Please
find below our latest Weekly Trend Update Report covering major
asset classes and currencies.
Have
a nice week and stay safe.
Marc
Bentin
Bentinpartner
GmbH
Trend
Status Update
All these measures averted for now the worst of the consequences of a potentially
massive deleveraging and fuelled a powerful rally which was brought to end on Friday
when indices dropped -3 to -4%.
These support programs are massive but we may still get more of them later
on, as the COVID-19 situation evolves and in response to the economic fallout
of locking down half of the world population. We saw last week the first impact
on US “jobless claims” which blew out all expectations coming out at
3.3mn. More data will come as shockers whatever we expect in the coming weeks.
A harsh recession this quarter and possibly a depression the ensuing quarter
will keep policy makers on their toes.
Among the catalysts to look forward (more than a 20% reflex rally on a “shock
and awe” monetary and fiscal bazooka) will be the end of this lockdown and the
flattening of the pandemic curve. Some triage will be necessary as the current
pandemic is unlikely to be a “one off event”. That being said, not everybody will
be bailed out. Cruising companies will not be included in the US bailout as it
appears that they are not American for the most part and are domiciled in offshore
financial centres for tax optimisation purposes.
There will be long term consequences from changed social distancing
habits which will affect sport, restaurants and tourism perhaps for longer than
currently estimated. Others aspects will have a silver lining to it. Less cruising
and flying should have a have will command a lighter ecological footprint.
Supply chains will also be radically altered, rebalancing job opportunities around
the world.
Over the past week, the S&P500 rallied 11% (-21% YTD) while the
Nasdaq100 rallied 9% (-13% YTD). The US small cap index recovered 11% (-32%
YTD).
CBOE Volatility Index dropped -01% (376% YTD) to 65.54. The Eurostoxx50
rallied 7% (-27%), underperforming the S&P500 by-4%. Diversified EM
equities (VWO) rallied 6% (-26%), underperforming the S&P500 by-5%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7
currencies sold off by -5% (3%) as funding dollar problems eased while the MSCI
EM currency index (measuring the performance of EM currencies vs. the USD)
gained 1% (-6%).
10Y US Treasuries rallied -14bps (-127bps) to 0.64%. 10Y Bunds dropped
-15bps (-29bps) to -0.48%. 10Y Italian BTPs rallied -30bps (-9bps) to 0.95%,
underperforming Bunds by 15bps. After spiking 44 bps the previous week,
investment-grade spreads this week dropped 40bps to 112 bps. LQD (investment
graded ETF) rallied 14.7%, supported by intervention more than reversing the
previous week’s 13.3% decline and closing the fund at a premium of 1.6%. JNK (High
Yield short term ETF) closed with a premium of +1.2%.
Gold rallied +5% (+7%) while Silver rallied 9% (-19%). Major Gold Mines
(GDX) rallied 19% (-17%).
Gold rose on the heels of massive QE programs and exploding fiscal
programs. Goldman issued on Thursday a “buy
recommendation” on the old relic which helped at the margin but the most
noteworthy development were the growing strains between physical and paper gold
(exposed here) in response to both a supply (Swiss refiners had
to stop their operation as well) and a demand shock. This translated into a
spread a USD40 to USD80 at some point between the spot paper gold price and the
CME futures price going into the delivery of the March contract (but persisting
today in the next maturity) as the shipment of gold remains impaired by the
sanitary situation. Over the near term,
the scarcity of physical gold may draw some attempt to weaken the price of paper
gold but this will likely be met with more buyers for which there will be no
product at this reduced price, likely exacerbating the difference between paper
and physical gold price.
Goldman Sachs Commodity Index dropped -1% (-41%). WTI Crude sold off by
-11% (-66%).
Over the week end…
Bill Gates who is completely on top of all issues related to pandemics
around the world with his philanthropic activities urged a Nationwide 10-week lockdown to mitigate the spread of the virus, on fear of
nightmare scenario (now unfolding in New York, it would seem) as he called the initial US response
slow and chaotic.
Futures are dropping -0.8%, well off their worst levels, on corona virus
related fears and following a further decline in oil prices but with the
decline mitigated by expectations the Fed could also end up intervening officially
in equity markets as well (like Japan) if need be.
The People’s Bank of China reduced the interest rate on the 7-day
reverse repurchase agreements to 2.2% from 2.4%, as it injected 50 billion yuan
($7.1 billion) into the banking system. On Friday, China said it will increase its fiscal
deficit as a share of GDP, issue special sovereign debt and allow local
governments to sell more infrastructure bonds as part of a package to stabilize
the economy, Bloomberg reported.
Trend Score Card
Click here for technical
annotations.
US
& International Equities
Check out US and International Stocks’ Technical
Trend Status.
Sector
Trend & Momentum
Check equity sectors’ trend and performance …and when
they break out!
Fixed
Income
Check out 10Y US Treasury and Bund yields, their
trend, expected Fed rate moves and speculative positioning in 10-year Treasury
Futures.
US Recession
Risk Radar
A comprehensive list of
economic indicators to compare the current situation with previous recessions.
The
Dollar
Check out where the Dollar stands Trendwise and Breakoutwise vs. G7 and EM counterparts.
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).
Check out how precious metals, the dollar and the
Stock market correlate with each other and speculative futures positioning
on Gold and the Dollar.
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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