MBCC Trading Highlights 14th November'22 - Time to reassess, it's crunch time...what to do here?
One of the biggest lessons we have learnt in 2022 is that when the market gets TOO one-sided in one direction, bullish or bearish, it SNAPS at extreme points unwinding the one sided positions aggressively like a rubber band snap, trapping the bears and reeling in the bulls. That has been the deciding point to make $, i.e. get back in to play the old themes that are still valid or reverse positions as there has been a paradigm shift. Today we discuss in our note to subscribers if there really has been a paradigm shift or not?
When markets break, first long/shorts get squeezed as we saw last week when the whole world and their mom was long Energy and short Technology, what happened? #ouch Technology and non profitable companies of ARKW 0.00%↑ all bounced 20%+ ripping the underperforming Hedge Fund managers and the longs looking at their over-invested Energy positions wondering why they are NOT making money on this “Fed is done” rally? After this first break, then comes the eventual de-gearing moment that kills everyone, i.e. it gets indiscriminate. #noplacetohide
As we have said all along, the market has been/continues to be ONE BIG MACRO TRADE. Take a view on the Dollar and Fed, and then you break down your asset/stock allocations accordingly.
Today the S&P 500 is at 200 day moving average rallying up 10%, Copper broke out from < $7500/tonne +12% as Dollar got slammed, Yuan rallied along with all Dollar crosses, 10 year Bond yields fell from 4.2% down to 3.8%. We have just unwound the biggest oversold conditions, and reading all the analyst notes out there, each one saying IF this happens, then market up 20%, but IF this happens, then market down 20%. Great, that is super value add! No one takes a view but just regurgitates what has happened. Sure it is easy to look back and tell your clients “oh but we said this” and sure you will be right at some point, but how do your clients manage risk and pnl? Calling for a “buy” can be right eventually but going down 30% to move 20% higher is NOT the same thing. That is an entirely different matter already. So what do we do?
We look at our forward looking cross asset demand indicators, and tell you what is about to happen, i.e. taking a view based on a host of top down and bottoms up physical market analysis and USE the technicals to time our entry/exit points. This is NOT a bull market of the past 10 years where trends/chart analysis makes sense, i.e. it is not just one way. Physical and financial fundamentals will lead cross assets. But we use things like derivatives positioning and technical factors to call out the technical reasons that can move things, but it is important to understand the technical from the fundamental.
Now…its crunch time….we initiate a whole set of ideas in our note today for paid subscribers. We assess physical markets to see what is financial and what is fundamental, and what is the trade here? Making a call based on all the facts we know with a full list of opening/closing ideas, i.e. we put our money where our mouth is and not just hedge ourselves saying this or that could happen. After all, that is what we are paid to do…We know how frustrating the sell side can be, as we were on the buy side for years, i.e. when you need a view, they are unable to give you one, but then just chase whatever has already happened!