ridethepig | Back to the lab...
Updated
This purely defensive swing (betting against risk) is all the more surprising because, after the "energetic" advance from early dip buyers, anything other than a trap would have been expected. This powerful switch that is in play between buyers and sellers is what makes the combination a totally controlled 5-3-5 pattern.
So buyers do not believe in the solidity of the shock and see the stimulus measures chosen will make things better. Sellers who are in full control of the move down now threaten to undermine those naive early bulls on the 61.8% retracement; after that they will be ready to occupy the lows and extend towards 1700.
The aim of this idea is to build a timeless classic marking the beginning of the next leg in the economic cycle . No more, no less.
Yields are the one to watch; the inversion leaves any recession helpless against the stimulus because of the lagged effect. The lasting damage from "The Great Lockdown" will threaten credit markets for at least the rest of Q220. The inversion had to break off the journey lower and now the cycle perishes, history repeats without having got any closer to the 'solution'. From a very long term perspective, once the dust settles after this crisis (+/- 16,000 lows in Dow) we look set for a collapse in confidence of public services looks on the horizon. For those with a background in behavioural economics you will know this will trigger further capital flight out of Bonds and towards Equities which brings in long term targets into 2023 at +/- 30,000. Trump cutting funding to the WHO is a game-changer so it looks like we are set for another rush towards private assets via artificial devaluation of USD into 2035 which is the same target date for China's big tech strategy. To put simply, this is a dip worth buying in Equities eventually though, in my books expect further pain to come.
Now the 2's5's curve returns home, satisfied and in a good mood. The destruction, a final leg lower and a final cleanse of all the early risk buyers. A short, fast and violent swing. Full of dramatic events, the continual support from FED has not changed in appearance but it has been an expensive floor for them to put in.
A quick update in the odds of scenarios we need to track on the Fundamental virus side:
1️⃣ Bullish Case - Northern Hemisphere curve flattening with US and Europe opening early June. Will trigger direct legs back towards all time highs across the board in Equities (17% odds).
2️⃣ Inline Case - US and Europe opening in July with clear preparations for further rounds of social distancing programs that will come into play again at year-end through Q1 2021 as the virus migrates back in the Winter months. Opens up another calculated leg down in risk markets to sweep the current floor in place and early buyers (was 68% odds).
3️⃣ Bearish Case - How fast the consumer comes back and managing these expectations is the one to track and it boils down to whether people have the confidence to return to hotels, travel, shops, bars, restaurants etc… If ‘business as usual’ does not return as masses remain afraid then we can enter into a depression (15% odds).
It looks like we are set for a re-opening this summer and for schools in the West to go back in September. We will keep a close eye together on whether the inflows dry up, and will it be for long? We'll see. For now keeping a defensive stance, when equities roll over we will have a clearly defined swing and range in play for the rest of 2020.
So buyers do not believe in the solidity of the shock and see the stimulus measures chosen will make things better. Sellers who are in full control of the move down now threaten to undermine those naive early bulls on the 61.8% retracement; after that they will be ready to occupy the lows and extend towards 1700.
The aim of this idea is to build a timeless classic marking the beginning of the next leg in the economic cycle . No more, no less.
Yields are the one to watch; the inversion leaves any recession helpless against the stimulus because of the lagged effect. The lasting damage from "The Great Lockdown" will threaten credit markets for at least the rest of Q220. The inversion had to break off the journey lower and now the cycle perishes, history repeats without having got any closer to the 'solution'. From a very long term perspective, once the dust settles after this crisis (+/- 16,000 lows in Dow) we look set for a collapse in confidence of public services looks on the horizon. For those with a background in behavioural economics you will know this will trigger further capital flight out of Bonds and towards Equities which brings in long term targets into 2023 at +/- 30,000. Trump cutting funding to the WHO is a game-changer so it looks like we are set for another rush towards private assets via artificial devaluation of USD into 2035 which is the same target date for China's big tech strategy. To put simply, this is a dip worth buying in Equities eventually though, in my books expect further pain to come.
Now the 2's5's curve returns home, satisfied and in a good mood. The destruction, a final leg lower and a final cleanse of all the early risk buyers. A short, fast and violent swing. Full of dramatic events, the continual support from FED has not changed in appearance but it has been an expensive floor for them to put in.
A quick update in the odds of scenarios we need to track on the Fundamental virus side:
1️⃣ Bullish Case - Northern Hemisphere curve flattening with US and Europe opening early June. Will trigger direct legs back towards all time highs across the board in Equities (17% odds).
2️⃣ Inline Case - US and Europe opening in July with clear preparations for further rounds of social distancing programs that will come into play again at year-end through Q1 2021 as the virus migrates back in the Winter months. Opens up another calculated leg down in risk markets to sweep the current floor in place and early buyers (was 68% odds).
3️⃣ Bearish Case - How fast the consumer comes back and managing these expectations is the one to track and it boils down to whether people have the confidence to return to hotels, travel, shops, bars, restaurants etc… If ‘business as usual’ does not return as masses remain afraid then we can enter into a depression (15% odds).
It looks like we are set for a re-opening this summer and for schools in the West to go back in September. We will keep a close eye together on whether the inflows dry up, and will it be for long? We'll see. For now keeping a defensive stance, when equities roll over we will have a clearly defined swing and range in play for the rest of 2020.
Note
Eyes on the highs here as we enter into ECB/FED territory right into the value area. Actively looking for sell positions from the open.Trade active
Note
Note
We are sitting in the load zone for the FED main event... Note
We are still on track here for those following US Equities and the second leg sell-off from the 'Loading Zone'. The highs held, despite a minor overshoot and we are set for the flush; 2400 remains an initial target for shorts, while the final target in the cycle down probably looks more like +/- 1,800 now.
Markets itching to test the limits and see whether FED can really hold on with both hands, the final swing down via Powell capitulation to -ve rates in play? Starting to look like it.
Note
We are here from above 👇2️⃣ Inline Case - US and Europe opening in July with clear preparations for further rounds of social distancing programs that will come into play again at year-end through Q1 2021 as the virus migrates back in the Winter months. Opens up another calculated leg down in risk markets to sweep the current floor in place and early buyers (was 68% odds).
Note
Very little to update all month... we are still chopping at the highs with a necessary retest of the lows still pending:
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