Month: December 2018
More importantly, if you are interested in subscribing to the ’50 on Markets’ service, please note that it will remain active throughout the holiday period and that we will be releasing a number of key Video Updates before year end.
Post FOMC
“I will not allow yesterday’s success to lull me into today’s complacency, for this is the greatest foundation for failure.” – Og Mandino
It’s all about follow-through now. Even if we know that usually, the best time to fade post FOMC moves tends to be 24/48h after the release, the current context is slightly different.
In today’s webinar we will focus on updating our current outlook and how we would manage existing positions, along with new opportunities. Please make sure to follow along on out Twitter feed for chart updates today as we are too busy on the trading side to load charts onto the blog.
Our current base-case assumption remains that indices have yet to bottom and that the dxy remains in a topping process. We are well aware that this has been an unpopular view and we will continue to discuss and dissect our rational and thinking in today’s session.
Do not be surprised to see aggressive moves in the coming days as we head into the end of the week/year and as participants are forced to react to recent action. Remember that you can always refer back to our Latest Outlook Video.
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Waiting for the FED
“In essence, if we want to direct our lives, we must take control of our consistent actions. It’s not what we do once in a while that shapes our lives, but what we do consistently.” – Tony Robbins
Here we go with the much anticipated decision. Last meeting of the year and a key turning point as we head into 2019. Remember that the focus will be on how price reacts post the decision and press conference. It usually takes the market some time to really settle down and pick a direction so don’t be fooled by knee-jerk moves.
Clearly, today’s release is slightly out of the norm both in terms of actual implications of the decision but also due to the mounting unprecedented political pressure to stop raising rates. Base-case expectation remains for a dovish hike but we’ll be ready for whatever we get out of Powell.
In terms of recent market action, we continue to see unwinding of risk positions and as expected, rallies continue to get sold. Furthermore, as we have warned, yesterday we also saw markets selling into the usual BS headline resales from Washington when indices trade on the lows. The tape has changed and unless we see something very constructive out of the FED or the White House, chances are that we are still nowhere near the end of this de-risking / de-leveraging phase.
In today’s session we will focus on how prices tend to react on these releases and how we would look to both manage existing positions and/or initiate new ones following the announcement.
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Outlook Video
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Waiting for FOMC
“In ‘Confessions of a Winning Poker Player’, Jack King said, ‘Few players recall big pots they have won, strange as it seems, but every player can remember with remarkable accuracy the outstanding tough beats of his career.’ It seems true to me, cause walking in here, I can hardly remember how I built my bankroll, but I can’t stop thinking about the way I lost it.” – Mike McDermott (Rounders)
Despite the heightened headline risk across the board, the real focus this week is going to be the FOMC meeting. Remember that we have a lot of other key data out from around the world, including BOJ and BOE but again, it’s all about the FED and the expected ‘Dovish-Hike’.
As we have been discussing in detail, the tape continues to trade in a very heavy manner and we believe that this distributive phase, where we remain positioned in ‘sell the rally mode’, still has to resolve with more downside and and proper flush.
intraday, out focus will remain on keeping a very close eye in the action on both small caps and financials. Unless the market can manage to stabilize these, it is going to be very difficult for indices to hold any sustained bounce attempt.
Remember, historically, December Triple-Witching Week tends to be bullish and a lot of participants will be looking to play this seasonal pattern, along with the much awaited and anticipates Santa Rally.
Once again, this is going to be a KEY week, not only for indices but especially for the DXY. In today’s webinar, we will review current context, possible scenarios and how we will look to position for action into the end of the year and into 2019.
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Into the Weekend
“When the facts change, I change my mind. What do you do, sir?” – John Maynard Keynes
As we have been discussing for months now, economic data has peaked, growth is slowing and liquidity remains a massive concern. Pretty much all asset classes are under-performing cash, credit is in trouble, Banks continue to be unable to catch a bid yet markets remain in a very complacent mode, convinced that the Santa rally is around the corner and that new all time highs are inevitable.
Naturally, everything can catch a bid, especially in this low liquidity algo-driven environment. However, unless something drastic changes, sooner or later, markets will have to wake-up to this reality and reprice. Clearly, this has already started under the surface and we continue to see a lot of selling into recent strength but the wake-up call still hasn’t reached everyone.
Once again, keep an eye on RTY and the Banks. That’s all you need to get a feel for how we are trading under the surface and if any of the intraday rally attempts could have any real chance of sticking.
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Into ECB
“Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent.” – Calvin Coolidge
At this stage, we just have to be patient and get through the last ECB and FOMC meetings of the year.
Nothing much has change in terms of our bigger picture view. We still feel that markets are being extremely complacent and that we are currently in a distributive phase of the cycle. Naturally this does not mean that we could not move back higher but our belief is that the risk/reward is still on the ‘sell into strength camp’ both from a tactical and cyclical perspective.
Following on from our bigger picture Pivotal weaker DXY theme, here are 3 key charts that we will be discussing and reviewing:
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Morning Update
“Success is as dangerous as failure. Hope is as hollow as fear.” – Lao Tzu