* NFP again - probabilities still in favour of higher assetprices and increased riskappetite
Markets will initially react proportionally more positive to a somewhat "better number compared to a somewhat "worse" number. Institutional investors continue to force this market higher. iTraxx Europe and the iTraxx Crossover index are currently rallying too, pre the NFP, indicating market sentiment.
*Despite the bullish environment; Some bearish signs. Too early?
-The Nasdaq continues to lag the rest of the Equity market, just like it did in the fall of 2008. Its been going on for a week now. The SOX index have turned bearish. The SOX index was one of the first indicators that went bullish as the équity market turned upwards in March.
- The SKF ETF Ultrashort financials for US financial stocks seems to be bottoming out.
- The VIX index yesterday saw strong buying interest for MAY 40 Calls. Although quite short maturitywise, it was a while ago since there was good buying interest of VIX calls.
- ZAR, HUF, SEK looks to be topping out from their recent rallies, to turn weaker again. Normally followers of Equity markets.
-Gold looks to be bottoming out and have recently started to inch higher.
Although these signs might be premature, I will monitor them closely going forward.
*US Bank stresstests are over - as expected; no stress, apart from institutional investor buying panic. A continuation of the US financials rally?
According to GS, these stresstests were valid and prudent. While I do recognise the resources within the GS, I have to disagree. The US banks stresstests were not done properly, in my book.
They were way too soft and thus will likely not have that much value. The US government never really had any choice as to the outcome of these stresstests. Besides, they were leaked well in advance to "test the waters". Looking for market reaction. Since it seemed ok, no new measures were needed. Now, this could cause a further rally in US financials as the US markets open today. I will be watching the likes of Citigroup, Bank of America and Keycorp as they could be in for a continuation rally. Well see.
* I am Bearish the ZAR
One currency I am bearish on right here and now though, is the ZAR.
Apart from the Southafrican currency (ZAR) looking severely overbought and about to go weaker, there is also the issue of the SARB potentially increasing their FX reserves by buying USD in the Fx market. Usd/Zar has moved from 10.70 to 8.27 since March. During this drop, SARB;s currency reserves remains unchanged. It might be time to replenish these reserves for the SARB, while the market is not negative towards it.
(SARB is currently quite, 50% ish, underweight compared to their EM peers Mexico, Turkey and Brazil). There is also uncertainty as to whether the Finance minister Trevor Manuel will stay in place during the new Zuma administration. Speculations have suggested he will be appointed as head of a planning commission with at least equal, if not more, importance.
However, with the new president elect Zuma announcing his new cabinet this weekend. The Finance Minister post uncertainty remains. This will keep the ZAR Fxmarket on its toes as the current/former Finance Minister Trevor Manuel has been perceived by the market as a guarantor of financial stability, order and prudence. I am long Usd/Zar.
* What else?
Got a number of optionalities lined up. In the process of timing them. Will revert.
*Position changes and new positions
- Long Usd/Zar
- Long Eur/Sek
- Long Eur/Huf
As usual, good luck
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2 comments:
Hi....silly as it is, some in the leveraged world seem to be sponsors of short eurhuf at the mom... Almost certainly positioning supports their case (and hey they are long garbage right?!), and perhaps one can argue the trade balance is improving sharply. I think its ludicrous personally and why PLNHUF should be near the lows of the year strikes me as a mis-pricing (arising from nasty stops from people long this cross). Likelihood of intervention in ZAR makes a lot of sense doesnt it, although they only ever smoothed the market historically and guess you need something against it in this environment (looking for an opp to put on TRYZAR personally). Anyway, just my tuppence...have a good weekend.
Hi J72,
Hope you had a great weekend!
Yes, garbage has been the best floating asset in show.
Re Pln/Huf, if anything I would be considering getting long it. Re Zar, Im considering whether to utilise Eur/Zar as the preferred vehicle.
Anyway, although I can see this garbage rally continue further, I think were in for a setback shortterm.
Thank you very much for your views and informative insights, appreciate.
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