Tuesday 13 October 2015

A very public rollover



It started with oil


It bled into commodity types and FTSE.




The US meantime tried to fight it with volatility also having a splurge lower



but finally followed the commodity leaders and tipped overnight.




This all fits beautifully with classic overbought signals  (I thank Cam Hui for this http://humblestudentofthemarkets.blogspot.co.uk/2015/10/a-whats-credit-limit-on-my-visa-card.html)



Capitulation of the shorts? We have even had macro funds throw in the towel and I don't just mean close down  positions. I mean close down completely. http://www.bloomberg.com/news/articles/2015-10-12/fortress-said-to-plan-closing-down-macro-fund-run-by-novogratz

But to be a perfect fall this should be accompanied by a new news devastating concern. So far this morning the news is recycled old, known bad news and data is being twisted to fit.

The Chinese trade data out overnight, though soft was not as soft as many expected. It was a classic figure that can be used by both camps, so in that respect it isn't of much use at all. But it isn't terrible.

the UK BRC survey was released late last night and hasn't picked up much attention but saw September like for like sales exceed expectations +2.2%. Another sign that Joe Public is disconnected from the concerns expressed in financial land and hasn't got the message that this is a crisis? Come on guys, don't you know you are all meant to be suffering?

I can't get as worked up about inflation figures as others as I still see commodity inputs as the main drivers. Wages are not falling, so in many ways this is still good deflation mixed with bad inflation - that of all the monopolistic costs we have to endure.

The next bleedin' obvious that appears to be taken as read is this quarter's terrible corporate earnings. Braced we are, veritably braced! But so far the dribs and drabs aren't all bad. (H/T AL)

DELL/EMC: Agreed deal worth $67bn. $33.15 a share
BELLWAY: Beats expectations & raises dividend.
SAP: Q3 sales/profits beat.
LVMH: Quarterly sales beat, strong Europe/US.

I really wish I wasn't so cynical, because in a classic case I'd be happily shorting the back end of this market but the lack of new bad news (not the shoehorning of existing news), the disconnect between financial commentary and what the public is actually doing  and finally the complete flip in commentary this morning calling this as the start of the next slide, makes me wonder if this turn lower is so so blindingly obvious it must be too good to be true.

And if you want any further evidence that the bear case may be a bit too discounted then this released by BAML over the weekend should be born in mind.




With this in mind and having cut my longs on Friday, I am working trailing stops as entries to long risk positions rather than piling into the shorts.

4 comments:

Celeriac1972 said...

Thank you Polemic for once again helping me to separate the signals from the noise.

I am going to indulge in a self-interested ramble. Please excuse me.

A recent change in my employment status left me:

- with the time to explore markets/macro in a way that simply wasn't open to me before
- outside the procedural constraints placed on anyone in a financial institution who wants to manage their own money actively
- holding a large (for me) vested position in my former employers stock which enjoys beta >2

So today I have bitten the bullet and sold the stock, which took years to accumulate. 20% below its high earlier this year, but there you go. I simply couldn't live with the downside risk once doing so became a choice rather than a necessity. I have exited a leveraged long position that has been my bonded companion for the last decade or so. I am free to stop finding reasons to believe that equity markets will continue to climb.

Right now it feels odd. Tomorrow I hope to feel liberated.

Polemic said...

Cathartic isn't it Celeriac. Leaving the slavery of working for a nig final organisation is not all bad and ridding yourself of their stock is not only a way of moving on but also exceedingly sensible portfolio diversification. I tried to hold as little stock in an employer s possible as I am already long risk to then thru my own employment, pension provision and even regulatory risk wise, FCA should insist employees are short rather than long employer stock for the wn financial safety, I thought it was about decreasing financial risk not encouraging it

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