MBO Issue 103 (Jul 2020) When They Pull the Plug
By Lawrence
Content
- Review
- Euro Wanted to Breakout Upside But Is It Allowed
- S&P Limited Range as Prescribed by US Federal Reserve
- Gold Bullish Scenario Unfolded
- Big Picture Summary
Review
Euro found resistance at the down channel top and has been struggling since. We all know short Euro is a crowded trade but until breakout happens the bulls can only hope for the best.
The touch and shock move from the resistance zone tells us that S&P is following STOPD precisely. Even the pullback bottom has been sitting on top of the support zone. It is getting more interesting everyday seeing market dynamics being enforced this way.
Gold consolidated at the top part of its range and successfully defended the channel top as support, which gave it the potential to attack GLD 175 area as explained in last MBO.
A flip-flop month with the markets all stuck in range waiting for a direction.
(premium member only content below)
Part of our premium service, login now or upgrade your membership to view this report
Hi Lawrence,
Thanks for your insights.
Do you see any possible asymmetric spread trade opportunities worth investigating? (betting against beta? S&P v Russ2k? Rel strength country/sector baskets?)
If the US is in perpetual trouble, how pooched is Canada? The Ottawa overlords seem intent on giving everything away.
Cheers
It is always about timing and risk/reward with the indices. It is even more important now because of the volatility. e.g. buying a cheap put on a day that ES jumped 100 pts higher into 3250+ area will make more sense then like buying the same put when you see ES “topping out” at 3150s area.
The reason is that the upper boundary is there, so directional bet against the trend now, which is up, on daily and weekly, must be done on daily / weekly exhaustion run. We will probably see that coming soon.
Canada is masking out the damage of the lockdown with support payments. Once the support money is gone, which is 6 x 4 weeks period pointing to end of Aug / beginning of Sep, we will see the real impact on everything. Originally, the support payment was supposed to end this month but the government extended that from 4 x 4 weeks to 6 x 4 weeks. So, who knows if they are going to extend that again. =)
One area of interest is the banking sector. No matter what happens now, the banks are going to have a very hard time in coming few years. So short ETFs on the financials can be a good bet.
Thanks for your replies
Your point about using boundaries to frame any trade is valuable. I’m going to see if I can collate some data points orthogonal to price to calibrate when and where best to get some exposure to weakness in financials. There are some cracks below the surface in some of the Cdn fin entities and I agree 100% they have some headwinds coming for sure. Even a dent in the dividend stream from some of the big players would have ripple effects.
I’ve got a little side project going to scrape online marketplaces to gauge trends in sales of used big ticket items, excluding real estate, as an indicator of regional financial stress. Not sure if it has merit yet!
Be well
Investigate, collect data and analyze. That’s the way trader builds up their expertise over time.