MBCC TH 30th January'23 - "All eyes on the Fed FOMC as market has moved from extreme hawkishness to extreme dovishness, what could go wrong? Does 5th Feb Russian product ban really matter?"
The S&P 500 is now touching its “triple” top around 4050 (cash index) as we head into the infamous Fed FOMC this Wednesday. One thing we learned from 2022 was when markets price in 1 extreme, they tend to move in the opposite. Usually this tends to happen in few months/quarters, but the speed and velocity of these “macro” changes is happening in shorter and shorter time cycles. That is the basis for “bear markets” as they tend to suck in the bulls right at the top, only to spit them out, and take in the bears as prisoners as it reaches extreme lows. Rinse and repeat, till there is complete apathy all around.
The Nasdaq shown below shows the same “traits” as it too is flirting with the top end of its 200 day moving average/range. Will this break out or turn back down? All answers in today’s note.
Our slogan has always been “IT IS ONE BIG MACRO TRADE”, if not then why would all 25 different indicators move in the exact same way over the same time period, if it was really about “fundamentals”. Correlations are close to 1 and right now the theme in town is China is going to save the world with their reopening/coming back with a vengeance. What does the street do? Everyone is bulled up on the same trade across the board. But how much is financial and how much is physical? We break it down in our note to subscribers only. All Commodities are NOT the same, as look at Oil and then look at US/EU gas? Flows do matter in Commodities, eventually.
We discuss our trading calls on Coal, Gas and whether the Russian product export ban really matters and much more today with a live open portfolio shared with our subscribers as well!
What are Bonds/Credit/FX suggesting here? What are the shapes and term structure/volatility and skew telling us about how “traders” are positioned?