Trading Desk Notes - Sept 22Submitted by Polar Futures Group on September 21st, 2018
“Risk On” is the prevailing market mood and it’s been showing up everywhere:
Global stock markets have been rallying since their early September lows. The leading American indices (S&P, DJIA, DJT) have made new All Time Highs, the Euro Stoxx index is up ~5% , the Nikkei is up ~7%, and even the EM stock indices have bounced back a bit after tumbling ~20% from their January highs.
The US 10 year Treasury bond has fallen for 4 consecutive weeks with the yield hitting a 7 year high this week at 3.09%.
The US Dollar Index hit a 14 month high in August but closed lower 5 out of the past 6 weeks. Even EM currencies which had been crashing to All Time Lows have bounced back a bit against the USD the last week or two.
Commodity markets have also been buoyed by the “risk on” mood with front month WTI up ~12% from its August lows (made just as the USD was turning down from its 14 month highs) and copper has rallied >10% this week after a very steep 22% tumble from its June highs.
Cannabis stocks may be the wildest example of the current “Risk On” mood...and I find it VERY interesting that a number of these stocks started their recent spectacular rallies in mid-August just as the USD was turning down from its 14 month highs.
So what now? Will I be jumping on the “Risk On” market moves...will I be positioning for the moves to reverse? No to both. I will be watching...I think the market now has “No Fear” and I have no idea how long that condition may persist...the longer it lasts the greater the positioning risk once the inevitable turn happens. I will be watching for opportunities in all markets, as usual, but I think the US Dollar is key.