Wednesday, 10 June 2015

Short term market thought picture book.

Market thoughts

Lets go short term and run with a few things that have caught my eye to make me think we are near bounce levels in some popular sold off favourites.

Bunds - The trend for global rates is for higher yields but this bund bear is looking at the price action over the last two months

and marrying them to the volume on the comment-o-meter (a general impression of how much comment the fall is attracting) as illustrated by this chart,  kindly provided by Nordea's Martin Enlund ‏@enlundm. Bund price vs Google searches for "German yield"

The data 'surprise' of EU inflation is now out, so that's now in the price. Yield now at 1% is around a more normalised level. The intraday price action so far and the pause in panicky moves in other assets has me looking for bounce. 

And with that goes the DAX 

10% falls since the peak that are also tallied into the falls in bunds as those that are regulatory tied to holding bunds have been hedging through DAX. US equities, most noticeably the Nasdaq bounced from yesterday's spiky lows and so no reason to look for global influences to pull DAX lower today. Let's add the comment-o-meter that yesterday lit up with ' DAX officially in a correction after 10% sell off.  Well that's as good a buy signal as anything so looking for a base bounce here too. 

And oil is going back up too

And some oil stocks have room to catch up ( Premier oil -PMO) 

FTSE has fallen 

as commodity stocks have fallen ( RIO) 

But oil is up and woaah ! Look at copper bounce 

It's Wednesday. Yesterday was Tuesday (do I win 'genius of the day' award for that observation?). I like Turnaround Tuesdays and reffing Nasdaq again. Tuesday = Boioioing bounce. 

So I like FTSE on a bounce re commodities and the above mentioned European equity lift. 

Currencies? Mugs game. If you can pick your way through EUR/USD over the past 3 months then you need a medal 

Same for AUD/USD 

Last comment - UK property market is very disjointed.  Demand for low priced house is very high but outside London middle/higher end is stalled.  As with equity markets out there, expectations ( in this case driven by the election results) are not being matched by prices.  This (Hat Tip JG) is worth a read. 

So in summary - Looking for a pause in the last 10 day sell offs in European equities and a bounce in Bunds. But this is short term stuff as the macro out there hasn't changed, there has just been an adjustment of expectations towards it.  

Remember  [insert bland 'back your view' trading aphorism here]


abee crombie said...

Interesting thoughts on UK housing Polemic. Similar situation in some markets in the US

Though what worries me is that the bund hasnt stopped yet and I dont think anyone really knows where it will 1% sounds good. But maybe its 1.5% or 2%. Who really knows

For oil exposure I like MLPs the best... AMJ is a good ETN proxy or there are a fw closed end funds trading at a discount if you are inclined for a little less liquidity

Polemic said...

Abe- re bunds - 'maybe' is a dice throw, but looking for bund bounce on the reasons above. I also have the benefit of waiting a day before replying to you. Bunds have indeed now bounced. phew.