Live Wire (English)

#Gold shines amid uncertainty, weaker #dollar. #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Fri, 09 Jun 2023 06:30:00 GMT

Traders see gold as hedge against uncertainty, weaker dollar. The weakest jobless claims since October 2021 sent the dollar into a tailspin, benefitting gold. But also, given stocks have rallied significantly and many are still doubting the rally, traders are betting on gold as a portfolio hedge.

Stocks: June seasonality in pre-election years $SPY #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Thu, 08 Jun 2023 06:00:00 GMT

Seasonality can be useful in assessing probabilities. Historically, June tends to be a positive month for the US stock market in pre-election years. Source: Ryan Detrick

Speculative bets in tech stocks increase $QQQ #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Wed, 07 Jun 2023 08:58:34 GMT

"It's not just the price that's gone up. Speculative fervor is coming back as well. In a note to clients at the end of last week, Deutsche Bank pointed out that the volume of call-option buying in tech and Mega Cap Growth is nearing its highest levels of the pandemic era." Source: Bloomberg

S&P 500 - technicals signal ‘overbought’ $SPY $QQQ

paul.delabaume@flowbank.com (Paul de La Baume) — Tue, 06 Jun 2023 07:59:08 GMT

Bespoke Investment Group's graph below shows the S&P 500 closing 2.47 standard deviations above its 50-day moving average to fall into the “extreme category.” Source: Bloomberg

Oil rallies after Saudi Arabia cuts. $USO $XLE $SPY #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Mon, 05 Jun 2023 10:05:01 GMT

It’s fascinating to see oil rally after discussed it just last week. But what exactly is happening?
Oil first jumped on Friday and now this morning it’s continuing to do so. Behind the surge, at its Sunday OPEC+ meeting, Saudi Arabia pledged to cut production again. This time by an extra 1 million barrel-a-day of supply.
Clearly, the Saudis are trying to stabilise oil markets, despite Russia not playing along. Will it be enough? Most likely it could be for now to stabilise markets, but it doesn’t mean oil will soar back to its October 2022 levels either.

US stocks gain amid debt-ceiling deal.

paul.delabaume@flowbank.com (Paul de La Baume) — Fri, 02 Jun 2023 14:13:48 GMT

US stocks continued to advance amid debt-ceiling resolution and AI enthusiasm.

WTI Crude oil starts month on strong note $USO $XLE #oil #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Thu, 01 Jun 2023 12:21:17 GMT

Oil has started the month of June on a strong note. It could well rebound in the summer months as demand picks up. Recent price action has been led by piling up stockpiles and a divide within OPEC members, but traders may want to show patience and not give up on upside potential just yet.

#Swiss #franc launches strong rebound vs #dollar. $DXY $SPY #fx #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Wed, 31 May 2023 08:23:12 GMT

Swiss retail sales in May disappointed strongly coming in at -3.7% versus expectations of -1.4%, suggesting Swiss consumption is much softer than previously thought. This is the weakest number since a year ago when retail sales also fell before rebounding in the summer month. Today's data gave a reason for traders to ditch the Swiss franc, which continued to weaken against the dollar. The next leg higher could take the USD/CHF to around 0.94. This is consistent with our trade idea, in which we wrote about in yesterday's weekly forex ideas.

S&P 500 could be on the merge of a breakout. $SPY $QQQ #trading #fx

paul.delabaume@flowbank.com (Paul de La Baume) — Tue, 30 May 2023 13:15:10 GMT

S&P 500 futures have just slipped above the area of technical resistance. A few names continue to be the main drivers including Tesla and Nvidia. As we approach the summer month, a clearer technical breakout could form, with the possibility of lagging sectors such as financials and energy rebounding.

#debtceiling nearing deal $SPY $QQQ #trading #trending

paul.delabaume@flowbank.com (Paul de La Baume) — Fri, 26 May 2023 08:06:07 GMT

US lawmakers are moving closer to a deal that would raise the debt limit for two years. While the deal is not quite closed yet, it appears that it's imminent within a few days. Markets may however somewhat sell off on the news of the deal, as these events tend to be priced-in in advance and traders often exit the trader after positive news. Today should see lighter volumes as traders may exit positions ahead of the long weekend. Also interesting to note that markets are now pricing a 4.96% year-end Funds rate, which means there are essentially zero interest rate cuts priced in the second half of this year.

Treasury yields are rebounding, calling for caution $SPY $QQQ

paul.delabaume@flowbank.com (Paul de La Baume) — Thu, 25 May 2023 09:40:00 GMT

US Treasury yields have rebounded with the 2-year rising for 10th sessions in a row. Markets are concerned about: the path of inflation and labor, the Fed, and the debt ceiling. Traders may also lighten up positions as we approach the long weekend, but for now, at least in the Nasdaq, investors are cheering Nvidia's massive jump post-earnings.

20 #stocks make up 41% of the #S&P500 $SPY $QQQ #trading #markets

paul.delabaume@flowbank.com (Paul de La Baume) — Wed, 24 May 2023 06:00:00 GMT

Largest 20 S&P 500 stocks up to 41% of the index's market cap. The most since 2000, according to NDR Research. This means there are greater chances that if a few of these stocks disappoint or outperform, the market could see strong swings in either direction. This is also a warning sign as the index gets more concentrated. Yet the capital-weighted index has largely outperformed the equal-weight as Big Tech stocks surged since the start of the year.

Inflows into global #tech #stocks are surging. $QQQ $TQQQ #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Tue, 23 May 2023 07:45:06 GMT

Global technology ETF and mutual funds had $3.768 bln worth of inflows last week, according to Goldman Sachs. From a contrarian perspective, this is particularly negative in the short-term. Adding to worries, the Nasdaq 100 is led by the strong performance of just a few stocks and is now in overbought territory, looking at the Relative Strength Indicator.

Bond #yields suggest drop in #rates . Pivotal week for week, #nasdaq. $SPY $QQQ

paul.delabaume@flowbank.com (Paul de La Baume) — Mon, 22 May 2023 09:44:21 GMT

This week will be key to watch as FOMC minutes on Wednesday and inflation data with the US PCE on Friday could offer investors more clues on the Fed's next move. Currently, markets are forecasting only few chances of a June interest rate hike. But more worrying, markets expect many interest rate cuts in the next 2 years. Should core inflation and the labor market remain so persistently tight, it could be that the market switches to a view where interest rates stay higher for longer.

Big #Tech #stocks jump amid #AI enthusiasm $QQQ $TQQQ

paul.delabaume@flowbank.com (Paul de La Baume) — Fri, 19 May 2023 08:30:50 GMT

Hopes that lawmakers are getting closer to a deal on the debt ceiling sent the Nasdaq 100 surging. And adding to the regained investor appetite is the perspective of AI adding hundreds of billions in revenues. But is the market not getting ahead of itself? The Relative Strength Indicator (RSI) is now flashing overbought signals. Just as Fed members assured investors they are not looking to cut interest rates and this afternoon Fed Chair Powell is set to speak.

#Energy #stocks suffer from #downgrades, downbeat sentiment #oil #fx

paul.delabaume@flowbank.com (Paul de La Baume) — Wed, 17 May 2023 14:45:14 GMT

Energy stocks face some serious headwinds as traders turn more cautious on oil & gas stocks amid a blurred outlook for oil prices and corporate earnings growth. Particularly in Europe, analysts have made downgrades, worrying about how a potential recession could weigh on fuel demand.

Institutional #investors have been selling #stocks ! $SPY $QQQ #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Tue, 16 May 2023 12:54:24 GMT

“Institutional investors have been dumping stocks for the last 12 months. You have to ask yourself some serious questions when you see this." Source: WSJ. In our view this looks relatively normal as we have quite likely emerged into a new bull market since the October 2022 lows. If this is not a new bull market it would be the longest bear market since 2000, when stocks had reached extreme bubble-like valuation. This stock rally is driven by earnings, and investors view of the end in sight of high inflation and rising interest rates.

Hedge funds are now massively net short gasoil futures #oil #trading $USO $XLE $QQQ

paul.delabaume@flowbank.com (Paul de La Baume) — Mon, 15 May 2023 13:59:21 GMT

In the last five years, managed money has been net short oil only three other times by this much: Late 2018, COVID (3/20), and late-2020. In all 3 cases, a big oil rally followed. It will be interesting to monitor if this again oil rebounds. Meanwhile it does seem that OPEC+ is not looking to make further production cuts, but perhaps there could be other positive catalysts brewing on the horizon.

#Oil & Oil #Stocks Hit the Brakes $USO $XLE #trading #fx

paul.delabaume@flowbank.com (Paul de La Baume) — Fri, 12 May 2023 10:51:06 GMT

Oil and oil stocks traders are hesitant to buy dips (in size) due to supply and demand uncertainty. The debt-ceiling overhang may also likely be a contributing factor for what appears to be thin volumes.

Does #Swiss francs reveals #dollar weakness is overdone? #Fx #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Thu, 11 May 2023 12:46:24 GMT

The Swiss franc is proving to be very strong in light of the rush to safety because of the macro uncertainty and overall bearish sentiment as many expect a recession to unfold in the US later this year. But what is remarkable is that the dollar has weakened meaningfully versus the Swiss franc, all while raising interest rates aggressively. And looking at the 2 year US Treasury, it suggests that investor sentiment has pulled down the dollar, perhaps asking now for some level of mean reversal, for the USDCHF to revert higher.

Perspective: #Inflation vs average cycle $SPY $QQQ #stocks #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Wed, 10 May 2023 05:45:00 GMT

Today is US CPI day. So here is some perspective, even though markets do expect a hot inflation print. Source: Chart from The Leuthold Group

#Sentiment is still somewhat bearish (Barron's) $SPY $QQQ #stocks #fx

paul.delabaume@flowbank.com (Paul de La Baume) — Tue, 09 May 2023 11:23:18 GMT

This chart from Barron's is suggesting "Big Money" sentiment is still very much anchored on the low end, from a historical perspective. The chart suggests that stocks tend to recover after an initial market shock that leads to very bearish sentiment. There are a lot of other factors to consider, but that is the historical perspective. Some other indicators do point to a more "neutral" sentiment though. Do you agree about the bearish feeling or has overall investor sentiment recovered by now?

#Oil rebounds on signs of no #recession #oil #fx #trading #forex

paul.delabaume@flowbank.com (Paul de La Baume) — Mon, 08 May 2023 14:51:15 GMT

WTI Crude Oil gained 2.3% Monday after it gained momentum following the strong US jobs report, which beat expectations and strengthened the soft landing case for the US economy. Traders stepped in to buy the dip.

#Gold Surges on #Banking Stress $GLD #trading #fx #forex #crisis

paul.delabaume@flowbank.com (Paul de La Baume) — Fri, 05 May 2023 08:35:33 GMT

Gold traders are kept busy as gold surges on banking stress and a weakening dollar. The yellow metal is seeing persistent dip buying behavior as traders adopt the view that demand above $2000/oz will remain strong amid banking stress and overall strong investor demand, including buying by central banks globally. Will gold finally break lower or have we entered new normal where gold remains above $2k/oz?

WTI Crude Oil re-tests lows in 'Flash Crash' fashion! $USO $XLE #oil 'trading

paul.delabaume@flowbank.com (Paul de La Baume) — Thu, 04 May 2023 13:25:50 GMT

Oil prices tumbled as traders fear the perspective of rapidly falling global demand and ample supplies as traders speculate that Russia didn't reduce output as planned. The market is pricing uncertainty around the OPEC+ cuts given there are some signs Russia seems to have not followed through on the pledged output cuts. So, for oil traders, this should add volatility and make it more difficult to find a market equilibrium. For opportunistic equity investors, it could also offer buying opportunities as stress potentially comes back to oil-related stocks. However, the oil&gas sector may continue to underperform because of the weakening macro backdrop.

#S&P500 average #returns 1y after last #Fed hike $SPY #trading #fx

paul.delabaume@flowbank.com (Paul de La Baume) — Wed, 03 May 2023 05:45:00 GMT

The US Federal Reserve is expected to proceed with its last interest rate hike Wednesday. Here are the average returns for the S&P 500 one year after last hike, in the past. The biggest hurdle in our view is valuations are now expansive. As a result, it is more of a traders's market, perhaps.

Have We Seen the Peak of the EURUSD? #euro #dollar #forex #trading

paul.delabaume@flowbank.com (Paul de La Baume) — Tue, 02 May 2023 13:39:02 GMT

The central banks events with the Fed on Wednesday and ECB on Thursday could add volatility to the EURUSD. Europe should be particularly sensitive to a global economic slowdown and we are seeing some slow-down being priced in the market looking at commodities such as oil, taking into account demand weakness. The EURUSD as a result could be particularly vulnerable to a global economic slowdown, which could take the pair down back to where it was about a month ago at around 1.08, from 1.0950 currently. Also, to take into consideration that the market has already prices many interest rate cuts for the US Federal Reserve, and should expectations for rate cuts disappoint, it could once again give the dollar a boost. When everybody is talking about the end of the dollar, it is simply something to question and perhaps consider a possible opposite-direction scenario.

S&P 500 Volatility (VIX) - Lowest Since Nov'2021 $SPY #trading #stocks

paul.delabaume@flowbank.com (Paul de La Baume) — Tue, 02 May 2023 08:00:00 GMT

The VIX index, which measures the stock market's expectation of volatility based on S&P 500 index options hit its lowest level since November'2021. This is typically a sign that markets are COMPLACENT again. Markets can still climb higher and volatility can sink further, but it is telling investors are not so fearful now. Volatility picks up when traders are nervous, can't decide, and want to only take short-term positions or hedged. That's typically when there are more opportunities for active investors building positions or active traders. (think Mid-march, SVB crisis as an example).

S&P 500 Average #Earnings Beat $SPY $QQQ #trading #bears #bulls

paul.delabaume@flowbank.com (Paul de La Baume) — Tue, 02 May 2023 06:00:00 GMT

The earnings season is doing much better than expected, particularly for companies with pricing power muscle. Bulls have won, but they will need to perhaps caution as valuation are now overall expensive. ⚠️ "price is what you pay, value is what you get". Also, a word of caution, as so far it's earnings, not revenues, which are putting in the impressive beats. Per Bloomberg, "What is more striking is that the average earnings beat has jumped to 7%, really a 2021 type level beat and among the highest beat levels in the recent years." Source: Bloomberg

2x more positive earnings guidance for S&P 500 $SPY $QQQ #stocks

paul.delabaume@flowbank.com (Paul de La Baume) — Mon, 01 May 2023 12:15:00 GMT

The busiest week of earnings season for the S&P 500 saw nearly twice as many positive guidance announcements as negative. After trending lower since late 2021, overall guidance is now moving higher. Source: Earnings Whispers