Intraday Market Thoughts Archives

After a wild week of trading (mainly in indices), I am opening access to the Thursday's Premium video, recorded hours before this week's 2nd DOW long --which hit its final 23180 target for 580 pts. In it I lay out the rationale for the intermediate bounce in indices (despite the toxic narrative) and the latest on FX and metals. Have a goood weekend. Full video.

من فاتته فرصة شراء الداو جونز يوم أمس، يمكن مشاهدة الفيديو بخصوص فرص الجلسات القادمة. الفيديو الكامل

Another wild day on Wall Street ended with an impressive rebound in stock markets but a concerning dip in consumer confidence. It was the biggest intraday market gain since 2010. The FX market had a more risk-averse takeaway with the Swiss franc leading and Australian dollar lagging. US trade balance is the data point to watch on Friday. A new Premium trade has been released 3 hours before the close of the NY cash session, explained in the Premium video below.

The rollercoaster in US equity markets at what's usually a quiet time of year continued on Thursday. The S&P 500 fell by nearly 3% late in the day then stormed back to close nearly 1% higher. Importantly, Thursday was the final day to settle US equity trades before year end, meaning that anyone selling for tax reasons needed to do so Thursday. That paradigm may have signaled the 'all clear' for dip buyers, at least for the moment. A hint came earlier in the day as European equities had a late surge to pare losses.

While this was a second small victory for the bulls, there are some fresh concerns about the economy. December consumer confidence fell to 128.1 from 135.7. the consensus was for a dip to 133.7. It's the second data point this week (following the Richmond Fed) that's badly missed estimates.

Still, the picture remains mostly positive in the hard data with initial jobless claims and the FHFA both matching estimates Thursday.

One number to watch on Friday is the US November advance goods trade balance report due at 1330 GMT. The consensus is for a $76.0B deficit and economists are rarely more than $3 billion off the mark but this is an unusual time as tariffs hit. A miss would raise fresh questions about the impact of the trade war.

وأخيراً، تبدأ مؤشرات سوق الأسهم في ارتداد طال انتظاره. قبل أن أقدم وجهة نظري حول ما إذا كان هذا الارتداد سيستمر أم لا، تجدر الإشارة إلى أن مؤشر “داو جونز” ومؤشر “ستاندرد آند بورز 500” قد انخفضا لمدة عشرة أيام متتالية حتى يوم الإثنين، وهو أطول سلسلة من الخسائر اليومية المستمرة منذ البداية الألفية على الأقل. فلماذا تتقدم الآن ومتى؟ التحليل المفصل

And just like that, US stock indices reach new superlatives –this time on the positive side. The Dow Jones Industrials Index closed up 1084 points to post its highest point gain in history. It was a 5% gain, the highest percentage daily gain since March 23, 2009, which coincided with the start of global QE policies and the beginning of the 10-year bull market. Today's rally coincided with the S&P500 bottoming right at the 200-WMA as well its trendline support from the March 2009 generational low. The Premium long trade in the DOW30, released earlier this morning hit its final target for 600-pt gain. Interestingly, another 9% or 1200 pts in the DOW30 and the index becomes unchanged on the year.

Fastest 20% since 1998

And for a perspective on the pace of current market dynamics, it has taken 18 weeks for the S&P500 and DOW30 to fall 20% from their highs--the fastest implosion into a "bear market" since the 1998 collapse of hedge fund LTCM when indices plummeted 20% from in a matter of 7 weeks. 1998 was a case of systemic market risks resulting from overleveraging in EM debt. Today is combination of macro, algo excess pricing and misplaced FedPolicy.

Perhaps the lack of fundamental explanations for this monstrous rally is similar to the lack of fundamental explanations for the 10-consecutive daily declines in indices, which had never been seen in this millennium. After Monday's slide, US Finance Minister Mnuchin announced he would convene a meeting of the Working Group on Financial Markets (also known as plunge protection team) to help stabilise markets. Combining the plunge-protection team with the arrival of 20% decline is a decent explanation for massive bids of the lows. Other news such as US and China announcing trade talks will resume next month. There will be further gains from here on, but I do not see indices hitting new highs. A recession by Q4 remains my  base case scenario.

If the major US indices drop another 6% will, they will get us to the 200-week moving average, i.e. 2348 on SPX, 20687 on DOW30, or -20% from the top. It appears as though the next stop in S&P500 and DOW30 is 20670 Even on Christmas Eve when US markets are meant to close early, equity markets continue to wilt and risk trades soure, while talk of Trump firing Fed chair Powell didn't help. Neither did the "do not panic" letter sent by US Treasury secretary Mnuchin to the nation's top banks helped as US indices fall 14% in December, the biggest monthly decline since the fateful October 2008. US indices are also posting their 10th consecutive losing day, a streak never seen this millenium according to Ashraf. CFTC positioning data showed fresh GBP selling and EUR stabilisation. The Premium short in USDJPY hit its final target for 200-pip gain. The last two trades in the DOW were stopped out.

From the sunny market days of September, oil and some equity markets have fallen into a bear market in short order. Last week was the worst for US equity indexes since 2011 as the S&P 500 fell 7%. Month-to-date, S&P500 & DOW30 are down 14%.

The worries are familiar, primarily tariffs, interest rates and Chinese growth. At the same time, there are plenty of indications that the US economy is strong and few signs of a sharp slowdown, let alone a recession. One exception is business investment, something we highlighted last week. Core durable goods orders fell 0.6% in the November report and that marks a contraction in three of the past four months.

At the same time, the calendar provides some clues. The rout in the past week had the distinct flavor of a market being driven by forced selling, flows and fears. Year-end tax loss selling is undoubtedly part of the equation and hedge fund underperformance may have finally triggered waves of redemptions.

Perhaps the selling isn't justified but consider this: Sometimes that market can create its own narrative. Selling can stifle the mood in the economy; banks slow lending and consumers tighten up. It can become a self-fulfilling prophesy. The turmoil can also lead politicians to make some grave errors. The White House was in damage control on the weekend after reports said Trump had frequently mulled firing Fed Chair Powell in the past week.

Ironically, the biggest problem for the markets may well be the various positives of the US economy, which currently act as an excuse for the Fed to commit its obligatory cyclical policy mistake.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. This week's report was delayed because of the US holiday.

EUR -53K vs -56K prior GBP -61K vs -42K prior JPY -103K vs -98K prior CHF -23K vs -18K prior CAD -7K vs -12K prior AUD -35K vs -46K prior NZD -3K vs -15K prior

Specs picked a bad week to lighten up on AUD and NZD shorts as both paid of late in the week as risk aversion escalated. Meanwhile cable slumped on Dec 9-10 but rebounded afterwards and has chopped sideways. Still, it's never more than one Brexit headline away from another rout.