Our thoughts and prays remain will all the innocent in all conflicted regions.
Thanksgiving Day holidays have made way for a moribund market, but perhaps the best gift of all has been the release by Hamas of Israeli hostages. US equity markets are tracking sideways, as traders digest recent economic data and past profit reports from megatech companies. The USD has been under pressure helping some commodity markets stabilise with gold trading to a monthly high of US$2009 enroute to potentially challenge the old highs. Iron Ore has broken resistance at US$132 looking to challenge US$155 even though we are uncertain on the economic outlook for China and energy markets seem to be carefully treading water ahead of potential spread of Middle Eastern concerns and the commencement of the northern hemisphere winter demand period. Traders seem to have taken a long weekend to enjoy the holidays and the Black Friday sales, which incidentally seem to be going on for ever.
But first the Middle East. It is hoped that the truce will be extended so that more hostages and Israeli Hamas prisoners are exchanged back to their loved ones. Comments for US Biden reiterated the need for clarity and an extension hoping that a resolution of some sort could be thought out. Similarly, Hamas, spokesperson Hamdan retorted the same. The Israeli PM, however, noted that hostilities will commence after the ceasefire reiterating his needs to eradicate Hamas. A hard-line approach, where it is hopefully that it will not backfire, and other Arab states will become involved. So far Arab state involvement has been contained. This remains a risk especially for the oil and equity markets to contend with.
In a note over the weekend the CNN Business reported that Michael Burry, the “Big Short” investor who became famous for correctly predicting the epic collapse of the housing market in 2008, has bet more than $1.6 billion on a Wall Street crash. The Fund manager took up a series of put options in the S+P and Nasdaq. In the back of most serious traders’ minds it seems odd that we are trading just under the record highs for many of the equity markets. For instance, the NASDAQ’s record high was in Nov 2021 at 16,768. It is currently, trading at 15,906. Oddly enough and following on from reports from the broader equities market, the mega tech companies reported 3rd quarter earnings late October they came with a warning and guidance that Q4 was going to be softer. Yet since these lows US Hedge Funds have been piling into the tech space helping the sector to near record highs. What have we missed? Questions about fair value resound in many discussions as traders look to see if we should be trading here or a lot lower given the sectors guidance. The market remains supported. As mentioned in last week’s report it doesn’t make sense to go long and with momentum indicators at extremes it is perhaps better to sit on the sidelines or wait until cracks start to emerge.
Interestingly, in the commodity sector gold has had a standout performance, the weakness in the USD is the headline reasons why gold is going up. Inflation is under control albeit not to the Feds level needed but appears to be under control all the same. Gold looks set to test 2020. Iron ore is bid on the back stimulus plans from PBoC and base metal metals on are under pressure echoing sentiment caused by US New Durable Goods orders last week which came in way below expectations and signalling to many that any economic strength has been snapped from the market. Durable Goods Orders measures the change in the total value of new orders for long lasting manufactured goods, including transportation items. A higher-than-expected reading should be taken as positive/bullish for the USD, while a lower-than-expected reading should be taken as negative/bearish for the USD. Durable Goods Orders -5.7% are well under average and makes us question any economic strength.
Closer to home, it’s been 3 weeks since the RBA increased official rates. At 4.35% it means that a lot of mortgage holders are doing 0.25% harder than the previous month. Oddly enough, there is not a lot of talk on the wires about this. The RBA moved sharply to tame a surge in inflation following supply shocks from the Covid shutdown and the breakout of war in Ukraine and potential outflow form the Middle East. The property market is looking soft again or should be.
On our positions, we are neutral on the US Equity markets, albeit looking to ... Gold is trading in step with the USD so on the sideline …
AUD/USD (0.6631) and AUD/CHF (0.5892) positions have…
Trade Focus:
NASDAQ: …
Technical Analysis:
From technical perspective momentum indicators are extremely toppy and expect to these to fold. We have good divergences appearing which is helping the proposed trade.
Support …
Resistance …
Momentum …
