This Short Would Be Foolish
It was yet another heavy
day in the markets as more technical levels were breached in the S&P’s.Â
Despite the good news economically, it seems to be overshadowed by fears that
the Fed is behind the curve, China is headed for a hard landing, and lastly
there is some serious unwinding of so called “easy money” trades compliments of
what some would say is a reckless Fed. Regardless of all the jawboning and
opinions, the markets are at some key levels here. The daily chart of the S&P’s
looks toppy, and any assault at breaking back above 1085 yesterday was met with
stiff selling.
From an HVT
standpoint there were a few solid set-ups on the opening, but in all honesty, I
have seen better trading days. I was actually surprised that the action was not
a bit more robust. For now the S&P’s appear sandwiched between 1086 and 1075
(200 day EMA). Today will shed more clues as to future price direction. A move
above 1085 should allow for a re-test of 1104.
As usual, the HVT
candidates were “story” stocks. Sun Trust Bank
(STI), CareMark (CMX) and the financial
stocks were most active on the opening.
^next^
FX (Forex)
The FX markets are still digesting the big moves
from last Friday. As mentioned on my
FX Email
Alert Service the cross currents happening not only from a
geo-political standpoint, but also with the Fed, equity markets etc, there
simply is no clear “story” developing at this time. Robert Savage of Goldman
Sachs had this to say:
“With US rates negative in
real terms – the moral hazard of the FED has grown. Now the world considers the
unwind. So its all about risk reduction – rumors of margin calls now dominate
the landscape of trading – with long Asian equities the favorite trade of 2004 –
its appropriately now the worst problem and main driver for pain. Short USD vs
Asia may be the next favorite trade and then – third trade – probably short JGB.”
The unwinding of “popular” trades is always
painful and lasts longer than most expect. It is during these periods where
nimble trading will see you through rather than trying to ride a trend, simply
because right now there is none.
The China hard landing story is taking a serious
toll in Asia, specifically Japan. Witness the dramatic rise in
USD/JPY in recent sessions. Yesterday the
gap from the broken neckline, post G-7 was filled in. JPY 115 to 120? Time
will tell. One thing is for sure, with most Japan’s exporters hedged around
106, they are enjoying the ride. If the USD/JPY were to resume its path lower,
this greatly reduces the likelihood of any BoJ intervention. However,
let’s first get through this period. As of right now, short USD/JPY would
simply be foolish.
As always, feel free to send me your comments and
questions.