"Keep It Simple Stupid," is the key lesson from Bloomberg's Richard Breslow note this morning as he conjures doves, snakes, hawks and starfish to make his point. Simply put, don't panic... yet. Here are the assets he's watching and levels to trade...
Sometimes when you just can’t keep the story simple, it’s best to do so in your trading. The world is a complicated place and there’s great risk in trying to reduce all causality to one factor. There’s a tug of war going on and the rope resembles a starfish not a snake. Although I’d have to admit, a lot of what we’re witnessing has a distinctly reptilian aura about it.
So what are some of the things we need to factor in?
Chair Yellen was hawkish. Why various assets responded to her in the way they did is a story about them. And well worth considering. But it doesn’t change the underlying fact. Bonds being bid doesn’t mean they don’t believe her or we’re watching a different press conference than precious metals traders.
Other developed market central banks are looking for the opportunity to reduce monetary largesse. Even if they aren’t ready to make the move, and despite any protestations to the contrary, doing less not more is what they are strategizing about. This is going to keep the dollar knocking back and forth based on the latest news that grabs everyone’s attention for a news cycle.
Be mindful of taking USD/JPY’s struggle with reclaiming the 110 level as a risk-off move until after you hear what the BOJ has to say tonight.
Politics remains a messy business, even if it’s being cited less often as the global headwind that allows rates to stay forever low. And anyone who claims to know how this populism, saber-rattling and scandals will play out is fooling you as well as themselves. There just isn’t going to be an escape from headline surprises. But not all of these revelations are created equal nor their outcomes destined to fit your personal preferences.
You can talk breakout trades as long as you accept that we are in violent ranges with nothing trading at levels we haven’t seen before during the last year. Yet think about how great the emotional swings have been. Look for ranges both short and medium-term. It will save a lot of heartache.
Moving averages are great, but in this environment focus on the horizontal lines that emphasize no-go zones. How many times over the last few weeks does EUR/USD have to fail under 1.13 before we realize there really is something up there?
And if you really want to look at an asset that screams don’t get carried away, put up a gold chart.
Even oil warrants caution rather than full-speed ahead.
How many times have moves stopped in their tracks because disaster is the savory and carry the sweet?
Breslow concludes with a 'simple' message for the day...
...two people said to me this morning that equities are getting killed. They’re down.
That’s about all that can be said at this point. We saw these prices at the end of last week.
The downside doesn’t get even remotely interesting until we break below 2400 in the SPX. Who knows, the day is young...