"...the subsequent rally we have been on over the last few weeks or so will be retraced and not only violate that “Bullard Bottom” but will do so with conviction and spike down to levels not seen in years. Again let me iterate – and quickly!"
"Three quarters of the previous selling of equity ETFs during January and February has been reversed in just three weeks. CTAs appear to have fully covered their shorts. Indeed both CTAs and Discretionary Macro hedge fund managers appear to be close to neutral right now... we conclude that the short covering phase that started a month ago is very advanced."
The one data set which may be most interesting to traders is the names which are the most illiquid and thus most likely to see material price movement as a result of today's rebalance. According to CS, it will be the following ten names, 8 of which it calculates will see a net outflow.
It may be option expiration day (always leading to abnormal market activity) but it remains all about the weak dollar, which after crashing in the two days after the Fed's surprisingly dovish statement has put both the ECB and the BOJ in the very awkward position that shortly after both banks have drastically eased, the Euro and the Yen are now trading stronger relative to the dollar versus prior. As DB puts it, "the US Dollar has tumbled in a fairly impressive fashion since the FOMC on Wednesday with the Dollar spot index now down the most over a two-day period since 2009" which naturally hurts those countries who have been rushing to debase their own currencies against the USD.
We have arrived. The moment of truth. No matter whether you believe this to be a bull market ready to re-assert itself or you view the recent rally in the context of a bear market about to unfold you must acknowledge the pivotal nature of where the market now finds itself in the days ahead.
The OPEX game is back in full swing and brought back hope amongst signs of bullish capitulation everywhere.... but there is plenty of bad (and even ugly) to consider.
The last few days have been "odd" according to one veteran trader and today's moves, with USDJPY plunging, S&P 'steady', and XIV (the inverse VIX ETF soaring) left the same trader exclaiming "what the hell is going on?" More unwinds from equity market-neutral funds? OPEX impacts? Or just the death-throes of a Fed-fueled market gasping its last breaths...
So let's get this straight. Russia and OPEC 'agree' to consider (not actually act upon) "freezing" production levels (at current record high levels) and the market plunges amid disappointment over no cuts. And today WTI spikes and erases all those losses as Iran supports the "freeze" plan but will not cut its own production plans...
Many believed that the NOK was backed by oil, not requiring a gold reserve. However, oil is no longer a scarce resource but an abundant commodity. Switzerland, Germany, America and other first world nations have gold reserves. Norway should have one too.
It appears the "what the market missed" that we detailed earlier - This sets the Fed on a collision course with the market because "with the market pricing fewer hikes than the Fed suggests, someone is going to end up being wrong," - is starting to filter out to the mainstream. Despite exuberant buying in FANGs, the broad market indices have retraced the post-Yellen exuberance as bond yields fade, hinting at the market's growing realization that this could be a policy error.