Monday, June 22, 2020
Please
find below our latest Weekly Trend Update Report covering major
asset classes and currencies.
Have
a good week.
Marc
Bentin
Bentinpartner
GmbH
Trend
Status Update
The sudden
(post covid) emergence of 10mn new day traders now active on the Robinhood
platform was best illustrated this month by traders driving the share price of Herz to treble from the moment the company had filed for
bankruptcy. While a judge had initially authorized the transaction, it only
took a late realisation by the SEC that issuing USD1bn worth of fresh equity to
quench the thirst of those traders would likely fail at providing the necessary
level of investor protection for the operation to be approved without asking
further questions. Last week brought another example of herd investing from
Robinhooders after a call to “Buy Black” (a legitimate pursuit if any) gapped
the price of a black community savings bank, Carver Bank, 7 times higher last Thursday, on 60mn shares exchanged (vs. a
previous daily average of 5k). This is reflective of a new power emerging on
Wall Street. It does not mean that these investors will not ultimately be
thrown off the road as the whole situation is also reminiscent of the
speculative excesses of day traders observed at the height of the internet
bubble. One of the influencers operating from Robinhood who, for his discharge,
claims he has no investment background and should not be followed …still has
got 1.5mn followers.
Lat week initial equity markets’ push came from Fed Chair Powell
testimony to Congress where he dampened the outlook for the US economy,
encouraged more fiscal support and hinted that he would be supportive of capping
yield levels, if necessary. On Monday the Fed also launched its “Main Street
Lending Program” whereby the Fed will offer up to USD600bn in loans to
companies that were in a good shape before the pandemic but now need financing
to continue their operation. Stronger
than expected US retails sales were the good economic news considered as such
as was the USD1trn fiscal infrastructure plan supported by D. Trump. Last
week’s jobless claims were however disappointing and more veteran investors
such as J. Grantham (“Uncertainty has seldom been higher”) or Howard Marks (“The Anatomy of a rally”) argued that the market is driven by Fomo and
liquidity despite the prospect of a sharp deterioration in earnings and a 15 to
20% decline in Q2 GDP. Retail investors (who are on the receiving end of
government benefits checks) are seemingly playing a major role driving equity
markets ever higher.
Over the past week, the S&P500 gained 1,5% (-4,1% YTD) while the
Nasdaq100 rallied 3,5% (14,9% YTD). The US small cap index gained 2,0% (-14,9%
YTD). XBI (SPDR S&P
BIOTECH ETF) rallied 8,6% (14,4%, Z-score 2,4).
Cboe Volatility Index sold off by -2,7% (154,9% YTD) to 35,12.
The Eurostoxx50 rallied 3,8% (-11,3%), outperforming the S&P500 by
2,3%.
Diversified EM equities (VWO) gained 1,1% (-10,5%), underperforming the
S&P500 by-0,4%. The Dollar DXY Index (UUP) measuring the USD performance
vs. other G7 currencies recouped 0,5% (1,6%) while the MSCI EM currency index
(measuring the performance of EM currencies vs. the USD) gained 0,1% (-4,5%).
Speculative traders, as reported by last Friday’s COT report, turned bearish on the USD for the first time since 2018. Chances are that
the drawdown imposed on dollar bears since last week’s COT report “cut off”
(dating from Tuesday evening) time reduced speculative dollar bearishness
somewhat intraweek but it remains that sentiment turned negative on the dollar
(and we are adamant about forthcoming dollar weakness as well).
10Y US Treasuries rallied -1bps (-122bps) to 0,69%. 10Y Bunds climbed
2bps (-23bps) to -0,42%. 10Y Italian BTPs rallied -9bps (-6bps) to 1,36%,
outperforming Bunds by -1bps.
US High Yield (HY) Average Spread over Treasuries dropped -33bps
(242bps) to 5,78%. US Investment Grade Average OAS dropped -14bps (49bps) to
1,50%.
In European credit markets, EUR 5Y Senior Financial Spread dropped -6bps
(24bps) to 0,76%.
Gold gained 1,2% (15,1%) while Silver gained 1,9% (-0,8%). Major Gold
Mines (GDX) rallied 2,8% (14,6%). Goldman revised its forecast for Gold to
USD2’000 for the next year.
Goldman Sachs Commodity Index rallied 3,3% (-31,8%). WTI Crude rallied
6,7% (-35,1%).
Over the week end….
Ø China announced the details of its security law
that will override Hong Kong’s legal system, also setting up a new security
building in Hong Kong.
Ø As Russians prepare to vote sweeping changes to the
nation’s constitution, V. Putin said he’ll consider running for a fifth
presidential term in 2024 if the necessary amendment to the constitution are
approved on July 1st.
Ø US futures gapped 1% lower overnight following the
week end news of a revival in covid cases (including in Tusla where D. Trump
held a meeting on Saturday that drew less attendees than expected) but the dip
was bought and it is now trading +0.5% higher along with gold while silver
gained +1.5% as risk appetite remains boxed in between second waves and the Fed
going all in.
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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fashion applying trend changes signals.
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