First JPM, then Citi, then UBS, then Gartman, and now, moments ago, Evercore ISI jumped on the "sell all rallies" bandwagon.
Sell All Rallies Down to 1900
China's ill-fated decision to prop up stocks and let their currency collapse is a Titanic error in judgement with broadly bearish cross asset implications for the rest of the world. With the macro backdrop more vulnerable today than at any time since the financial crisis, and the S&P 500 and NASDAQ still near all-time highs, we anticipate a downside move to 1900 on the S&P within the first two months of the year.
Tactically speaking the move to 1900 may not occur in a straight line as it did in August given seasonal factors and the binary shift in sentiment, and we would continue to aggressively sell any attempted rallies off of 1990.
Importantly, we reiterate our view that Crude and Energy remain structurally broken and possess significant downside from current levels which will only agitate and exacerbate the ongoing collapse in Emerging Markets, Currencies, Credit and the Curve, and raise the prospect of a deeper correction in developed markets.
Finally, we feel strongly that at least one of the beleaguered Commodity Currencies beginning with the letter "R"; Ruble, Renminbi, Rand, Real and or Riyal; are likely to be devalued before all is said and done, at which point we would likely become more constructive amidst the ensuing chaos.
So is this the moment when, as everyone jumps on the same side of the boat - the short one - one should do the opposite?
