Articles

The market flirted with trading a recession at the start of the month but has decided against it. Today’s data underscored why with better retail sales and initial jobless claims leading to the sixth day of gains in the Nasdaq. That 9% rally is the best six-day run since November 2022. The index is now up 12% from the intraday low on August 5.

Closing changes:

• S&P 500 +1.6%
• Nasdaq Comp +2.3%
• DJIA +1.4%
• Russell 2000 +2.4%
• Toronto TSX Comp +1.2%

This article was written by Adam Button at www.forexlive.com.

Crypto markets have often been front-runners of market sentiment but it’s not unfolding that way today. Bitcoin is down 3.6% but stocks are at the highs of the day, with the Nasdaq up 2.5%.

The divergence is likely related to worries in the crypto market about Mt. Gox liquidation and distribution. In any case, the Nasdaq Composite is now nearly back to the July 31 closing level. That was the big rally that came with the FOMC decision but was followed by a brutal global rout.

The rally since last Monday in the Nasdaq has been remarkable, particularly if you measure it from the August 5 intraday lows. It’s up 12% from there, which is a great return for a full year for most fund managers.

Part of what’s driving that trade is new life in the AI trade but it’s mostly due to refreshed confidence that global growth is ok and that any slowdown will be met by Fed easing. It’s certainly been an impressive bounce.

This article was written by Adam Button at www.forexlive.com.

Volatility in in August markets led to something of a reset in markets, with high-conviction trades being tested by rapid drawdowns. Zooming out though, fund managers have a relatively consistent view of a soft landing scenario.

“Core optimism on soft landing (76%) & US large cap growth stocks [is] unbowed,” Bank of America analysts write. “Just that investors now think Fed needs to cut harder to guarantee no recession.”

Cash levels rose to 4.3% from 4.1% but are still at the low end of historical norms.

There was certainly some deteriorating in the survey with the percentage of managers expecting slowing global growth falling rapidly, though still above levels from earlier this year.

55% of fund managers also said monetary policy was too restrictive, which was the most since October 2008.

In general, surveys like this are contrarian indicators.

Crowded trades:

1) Bonds

Despite the recent drop, expectations for lower bonds yields are above 50%. The last time they were this high was December 2023 and that marked the bottom. What followed was a rise in 30-year yields to 4.8% from 3.94%. Allocations to bonds were still low at a net 8% overweight but that’s a rapid change from 9% net underweight a month ago.

2) China

One area that’s notable is China, which has been been buried deep in the dog house. Optimism on it is at the lowest since May 2022.

3) Mag 7

Asked about the most-crowded trade, most fund managers continued to point to Mag 7 but some shifted to ‘short China’ or ‘long 2s’.

4) Long healthcare, short REITs

As for internal positioning, the net overweight positions were longest in healthcare, tech, equities and the US. Shorts were crowded in REITs, discretionary, materials and Japan.

5) Equities still crowded

Despite the recent drop in stocks, managers are still historically long equities.

6) BofA contrarian ideas

From Bank of America: “long commodities vs stocks, long RoW vs US equities, long small cap value vs large cap growth; long consumer discretionary vs healthcare.”

This article was written by Adam Button at www.forexlive.com.

Consumers still have money to fill their tanks or fly away.

That’s the message from today’s US retail sales report and commentary from executives at Walmart. Both emphasized a strong US consumer and WMT said the global consumer was also fine.

If so, spending at gasoline stations is likely to remain solid, underpinning gasoline demand.

Technically, oil is consolidating after testing $72 for the second time int he past three months. That test looks successful but it will take a rally above $84 to generate some real momentum to the upside.

The most-bullish indication is positioning, with net longs at-or-near record lows. Positive indications on inventories, demand or even Middle Eastern conflict could lead to a squeeze.

This article was written by Adam Button at www.forexlive.com.

since i qualified for a live account with CTI, i decided to give the weekend trading a test.

which immediately turned out to be a total failure with a 145-156 USD Spread on BTCUSD.
(more…)