Long
Nasdaq Bullish Entry
Updated
All risk indicators are pointing to a push higher in equities as the headline US CPI print today came in as expected and lower than the previous month. Core CPI notched up 0.1% so it isn't crystal clear that inflation is coming down due to the Fed's monetary policy. We also have a weakening US dollar as traders move into the safety of the US Treasuries, which in turn drops the yield of the 10-year note. US10Y is about to test the December 2022 low, and a close below would signal further downside potential. The eurodollar curve is massively inverted as are the US yield curves, signaling that the larger money markets are expecting something is up and that the Fed will have to change policy sooner rather than later.
The US has a new speaker and part of the concessions made was along the lines of not lifting the debt ceiling. This could have negative consequences before the new fiscal year starts in October, but is more likely to be a problem in Biden's final year, should we not get a bigger Federal Budget spending program.
For now, inflation is waning, which is obviously good news for any asset that was suffering under the rate hike cycle. eg. risk assets like Bitcoin and Nasdaq.
Levels on the Nasdaq I am watching include:
TP2 = 12570
TP1 = 12221
Resistance at 11605
With a hard stop at 11080
Note
Nasdaq is pushing higher.Equity rally due to systematic buying and HF short covering. Short interest has halved from the Q4 highs for EU equities, but is still elevated in the US. Macro HFs and CTAs have turned outright long equities, and their exposure is close to 12m highs, yet still below average. Long short funds have also reduced short positions, but their net exposure remains low too. Risk control funds’ exposure has increased only modestly and remains depressed by historical standards. So there is room left for more systematic/HF buying. In contrast, mutual funds
remain long cash and have dumped equities in recent months. As a result, their equity beta is close to the lows. Similarly, the bid from retail investors to equities has waned, with US households turning outright sellers of stocks. ©Barclays Equity Research
Trade closed: target reached
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