Sometimes you have to just throw in the towel, know when to fold 'em, and join 'em coz you can't beat 'em.. and that appears to be former fund manager Richard Breslow's take on the current utter apathy in markets currently. His message is clear - nothing matters except technical levels - which ironically, none other than CNBC's-own Jim Cramer admitted this morning "the market is completely divorced from whatever is going on," whioch presumably means "buy it all."
That which does not kill us, makes us stronger. A much debated concept, but in terms of navigating markets, there’s a lot of truth in it. Asset prices have been all over the map during the last week. Good news mixing with ugly news. Well-laid plans having to consider great uncertainty.
But one positive outcome is we have technical levels, and close ones, for just about every stripe of security class to lean on and whatever your directional inclination.
We’re not good at pricing geo-political events, hence the student body type moves to the headlines. Jackson Hole and the September central bank meetings seem to be swiftly becoming known knowns, so not a lot of help with what to do now. But there’s no reason to throw your hands up in despair. There are plenty of trades to do with limited downside risk but the potential to morph into something good.
The dollar comes out of this looking pretty good. Whether you look at it against the dollar index or the Bloomberg dollar index, it is definitely attempting to put in a bottom and see if it can push higher. It’s retaken its shorter-term moving averages and, more importantly, the levels it cratered from last week. On the DXY, you can risk half of one-percent to get two-percent of potential upside at 96 or play a break below 93.50 for a re-test of August lows.
Interestingly, and I’d say, unexpectedly, given recent trends, the euro itself looks decidedly so-so. Could be a position reduction. Maybe a reality check on ECB hawkishness. Versus the yen, below 130.5 is a potential problem, but hardly far away. We were close to getting back above it this morning. EUR/CHF has a beautiful pivot at 1.14 and we’ve been playing with that level all day. It’s still doing well against sterling, but one-percent lower and those calls for parity will seem like wishful thinking. But as frothy as it looked cruising through 1.18 to the dollar, it will look appalling below 1.16. It’s not surprising that we currently sit at 1.17. Although, I would point out that forays below 1.17 have been short-lived.
The S&P 500 has identified a 2440, 2470 pair of pivots. No reason to sit out 5 percent corrections and such. I’ve no particular bias, but would point out that it seems to get tradable follow-through when it crosses back and forth through its 21-day moving average.
For a real shocker, Treasury yields are trying to convincingly reject that panic dive below 2.2%. Back below would look horrific, but the risk is no more than 10 basis points. On the other hand, they need to clear the top put in before Chair Yellen’s July 12 testimony to break free of this demoralizing range.
Gold made a triple top on Friday, matching peaks from April and June. So far, despite any news, $1300 has proven to be a bridge too far. But if you want to play for it you can get a cheap look with a $10 stop from current levels. Below $1250 you can get a potential look at the July lows.
Oh, I almost forgot. West Texas crude broke below channel support at $48 this past Monday. If you want to be really parsimonious, play with that pivot.
Breslow concludes optimistically "so many opportunities and plenty of time to see what can be done with them... finally a market where it's easy to get rich."