Monday, June 15, 2020
Please
find below our latest Weekly Trend Update Report covering major
asset classes and currencies.
Have
a nice week end.
Marc
Bentin
Bentinpartner
GmbH
Trend
Status Update
Last week delivered a wake-up call with volatility returning and momentum
on the upside fading. It is too early to say whether we are heading for a relapse
or a second wave of selling but a few things are keeping us on our toes.
First and foremost, private investors (and
speculators) who were absent in March before the most powerful rebound in
history are now back “en masse” after the market has recovered most of its
losses. It is not the fact that hundreds of thousands of brokerage accounts are
being opened that has us puzzled but what this new money buys… namely bankrupted companies. Bloomberg had a brilliant story about Robinhood traders over the week end…Coupling this with seasoned
investors losing money and we get a more serious wake up call. Both Bridgewater
and Renaissance posted big losses this year, including in early June for Renaissance,
it seems. This suggests that something is really going wrong with the music of
the market (derived from the “administered” nature of financial markets). Buying
the market blindly with the sole conviction that central banks have us covered did
not work last week and may not work as well in the future either.
Investors may also have to weigh the risks of a
second wave if not of selling at least of covid cases around the world. We can
now cope better with the logistics of dealing with the virus but last week’s news
that Florida and Texas were suffering some aggravation compounded the concerns
originating from other hot spots in the world and the week end news that Beijing has recorded dozens of new cases in recent days, all linked to a major wholesale
food market. With researchers talking (and us all observing) growing evidence
of a “pandemic fatigue” and as countries reopen borders with Trump planning to
hold rallies, the temptation is real to lift our guard. This New York Doctor warning is a good wake up call as well that the virus is still
spreading and sparing no generation.
In its semi-annual report to Congress released
Friday (preceding Powell’s testimony to Congress this coming week), The Federal
Reserve put a spotlight on job losses and risks to the financial sector. “Despite increased resilience from the
financial and regulatory reforms adopted since 2008, financial system
vulnerabilities -- most notably those associated with liquidity and maturity
transformation in the nonbank financial sector -- have amplified some of the
economic effects of the pandemic,” the Fed said. “Accordingly, financial-sector
vulnerabilities are expected to be significant in the near term.”
Over the past week, the S&P500 sold off by -4,7% (-5,5% YTD) while
the Nasdaq100 dropped -1,6% (10,9% YTD). The US small cap index sold off by
-7,9% (-16,5% YTD).
Cboe Volatility Index rallied 47,2% (161,9% YTD) to 36,09.
The Eurostoxx50 sold off by -6,8% (-14,5%), underperforming the
S&P500 by-2,1%.
Diversified EM equities (VWO) sold off by -2,2% (-11,4%), outperforming
the S&P500 by 2,5%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7
currencies gained 0,2% (1,1%) while the MSCI EM currency index (measuring the
performance of EM currencies vs. the USD) dropped -0,2% (-4,1%). Over the week
end, S. Roach elaborated on his 35% dollar crash expectation (see BP read alert,
edit your distribution preferences here to start receiving these updates).
10Y US Treasuries rallied -19bps (-121bps) to 0,70%. 10Y Bunds dropped -16bps
(-25bps) to -0,44%. 10Y Italian BTPs climbed 4bps (4bps) to 1,45%,
outperforming Bunds by -2bps.
US High Yield (HY) Average Spread over Treasuries climbed 75bps (275bps)
to 6,11%. US Investment Grade Average OAS climbed 18bps (63bps) to 1,64%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 15bps
(30bps) to 0,81%.
Gold rallied 2,7% (14,1%) while Silver gained 0,4% (-2,0%). Major Gold
Mines (GDX) gained 0,6% (11,5%).
Goldman Sachs Commodity Index sold off by -4,1% (-34,6%). WTI Crude sold
off by -8,3% (-40,6%).
This morning…
S&P future is ebbing back (-1.3%) with the dollar unchanged and oil slightly
lower after losing 8.3% last week (Baker Hughes showed active drilling
rigs across the U.S. falling for a 13th week to the lowest in more than a
decade).
China's business-activity report for May released this morning reflected
a slow recovery with industrial production climbing +4.4% YTD (from +5%
expected). Retail sales dropped -2.8% ytd (-2.3% expected and -7.5% in April).
Policy decisions from the BoJ (on Tuesday), BoE (on Thursday) and the SNB
(on Thursday) are due this week.
J. Powell will speak to Congress
Trend Score Card
Click here for
technical terminology.
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.
Get the Score card of all major currency pairs in
terms of Trend, Momentum, Carry, GDP and Current account differential
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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using a
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applies a rule-based Trend/Momentum methodology to adjust this “trend neutral”
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