Geopolitical Tensions Rise, Equities Tumble
Equities faltering from Highs Bond Yields Turning lower?
Alright so the equity markets sold off here today as the NFP report looms tomorrow morning where payrolls are expected to rise by 200k and the unemployment rate to dip to 3.8%. We believe that the geopolitical uncertainty is also raising some eyebrows as Iran seems to be talking up a retaliatory game plan against Israel, but we aren’t sure how much of this is actual real risk and how much of it is just rhetoric. Whatever the case may be, we are seeing signs of risk off as equities tumble with bond yields lower and oil higher. This is what we would expect given the geopolitical uncertainty which seems to be trumping the NFP report tomorrow.
As far as how the dust settled today and yesterday the Nasdaq was the weak link with the Metals and Energies being the stand outs on the upside as Silver trades over $27 and Gold over $3k:
When we look at the Futures Model Tracker we don’t have any changes over the last few days and we are sorry that we missed the long in Copper, but we were patiently waiting for a retest of 3.85 but never got it! Oh well we continue our neutral positioning which will benefit from a lower equities market and steeper US yield curve and stronger US dollar:
As far as the MEGA8s Tracker, the hedge is once again doing its job this week and we will continue to hedge on any rallies to the upside on a weekly basis for this tracker. META has been curiously strong almost every single day!
When we look at this grouping on the charts tomorrow will post back to back weekly losses potentially, something that has not occurred in months:
As far as the market cap chart of the MEGA8s lets just say tomorrows close is very important another big down move and a major top will be in place for the high flyers:
Take a look at Nvidia, speaking of high flyers, it too will post back to back weekly closes with a settle below $903 on the weekly chart:
We also see JPM starting to rollover as well and a trade back into our longer term trend channel will once again capture this stock and turn the trend lower:
Speaking of lower, damn how about that LULU! It not only slice and diced through that initially rising support line, but now has hit the major support line right at $358. This stock is down 31% off its highs!
We also mentioned the US bond market and yields perhaps turning back down in a flight to safety fashion. This is something we expect to transpire this year and maybe the move is just beginning. From our purview, the US 30Y is about 50bp undervalued:
Ok guys, thank your for staying the course with us, please give this a like, please share if you can to expand our audience. The solar eclipse is coming and maybe just maybe that may be the beginning of a change in overall tone and sentiment in risk assets, who knows. One thing is certain, there is a tremendous amount of risk capital being deployed out there in the most recent FOMO trade and if we start to get some real profit taking, well, lets just say things can mean revert very quickly and catching a falling knife will turn an orderly sell off into something very nasty. The lofty levels by which things have been pushed open the door for some massive sell off potential should things start to spiral out of control, but Magnelibra readers and listeners will not be surprised, we got your back, so stay with us and see if you can learn a thing or two along the way, we greatly appreciate all of your support. Till next time…