Monday, June 01, 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
Fed Chair Powell spoke again on Friday in a Q&A session sponsored by
Princeton University where he threw a bit of cold water admitting “We’ve
crossed a lot of red lines that had not been crossed before” as he also appreciated
that social inequality constitutes major risk for the institution as its
actions has mainly targeted the securities market.
However, and just to hammer out the fact that the Central Bank’s “put”
remained well in place, Federal Reserve Bank of New York President John
Williams (the most influential voice at the Fed after the Chairman) said policy
makers are ‘thinking very hard’ about targeting specific yields on Treasury
securities as a way of ensuring borrowing costs stay low. ‘Yield-curve control,
which has now been used in a few other countries, is I think a tool that can
complement -– potentially complement –- forward guidance and our other policy
actions,’ he said… ‘So, this is something that obviously we’re thinking very
hard about. We’re analysing not only what’s happened in other countries but
also how that may work in the United States.”
Over the past week, the S&P500 rallied 3,2% (-5,4% YTD) while the
Nasdaq100 gained 2,0% (9,8% YTD). The US small cap index rallied 3,5% (-16,2%
YTD).
Cboe Volatility Index sold off by -6,8% (99,6% YTD) to
27,51.
The Eurostoxx50 rallied 4,9% (-17,4%), outperforming the S&P500 by
1,7%.
Diversified EM equities (VWO) gained 1,5% (-16,0%), underperforming the
S&P500 by-1,7%.
The Hang Seng has witnessed its worst week in 20 years.
The Dollar DXY
Index (UUP) measuring the USD performance vs. other G7 currencies dropped -1,2%
(2,4%, Z-score -2,2) while the MSCI EM currency index (measuring the
performance of EM currencies vs. the USD) gained 0,3% (-5,6%).
10Y US Treasuries rallied -1bps (-126bps) to 0,65%. 10Y Bunds climbed
4bps (-26bps) to -0,45%. 10Y Italian BTPs rallied -12bps (6bps) to 1,48%,
underperforming Bunds by 8bps.
US High Yield (HY) Average Spread over Treasuries dropped -43bps
(301bps) to 6,37%. US Investment Grade Average OAS dropped -11bps (76bps) to
1,77%.
In European credit markets, EUR 5Y Senior Financial Spread dropped
-10bps (33bps) to 0,85%.
Gold dropped -0,3% (14,0%) while Silver rallied 3,8% (0,1%). Major Gold
Mines (GDX) sold off by -3,8% (17,2%).
Trading volume on the COMEX has reportedly shrank by nearly 50% since problems
affecting the delivery of gold in April that led Gold Bullion banks to suffer considerable losses (HSBC reportedly lost USD200mn). Beyond those
losses, it is the entire plumbing of “paper gold” which is getting impaired as
it becomes more difficult, more risky and more
expensive to hold positions via futures.
Goldman Sachs Commodity Index gained 1,9% (-35,6%). WTI Crude rallied
4,6% (-41,9%).
Over the week end…
Nikkei +1% S&P future -10 points; China +1.5%
·
The dollar weakened
on a broad basis last week and again this morning (approaching key support
levels around its 200dma) with stocks dropping albeit only slightly overnight (dip
buyers keep emerging on every dip) and gold adding a few dollars.
·
Anger has exploded in the US, across several cities which braced for
more social unrest following the arrest and killing by the police of a black
man in Minneapolis. Several major US cities (including New York, Chicago and
Los Angeles) were (and remain) affected over the week end by protests, looting
and extended curfews.
·
It is probably
the worst way to escape from the Corona virus lockdown and social distancing, to
now have to add the threat of security concerns. D. Trump barely helped with
his tweeting activity over the week end seen by many as making matters.
·
Brazil
announced a record rise in the number of new corona virus cases.
·
As a solace to
the heavy wee end’s news flow, the US sent two Nasa astronauts over a
commercially developed rocket. That will perhaps help swallowing the pill of a
USD700mn grant that E. Musk was able to secure for holding Tesla’s share price
over a certain threshold for a certain period of time.
·
China pushed
back on threats by D. Trump on Friday in response to the imposition of a national
security law with severe impact on Hong Kong. Export control regulation could
be affected but Trump was sufficiently vague not to impact markets aversely
(stocks rallied on Friday on the absence of specifics).
·
After extending
an invitation to hold a G7 “in person” and German Chancellor A. Merkel
declining the invitation on sanitary ground, D. Trump delayed the invitation to
September and came up with a new guest list, extending an invitation to leaders from
Russia, Australia, India and South Korea as well the current participants,
calling the current setup “outdated.” China didn't make it to the guest list.
·
D. Trump announced
on Friday that he was pulling out of WHO, on the ground that it is too dependent
on China.
·
Overnight, a
private survey of China’s Manufacturing Purchasing Manager’s index came out
better than expected and expanding, helping the CSI300 to gain 1.3% despite more
turmoil in Hong Kong.
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.
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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