S&P500 heads to 3020: Big Turn for Risk Markets as US-China Steadies to a Deal
Stock-Markets / Financial Markets 2019 Aug 27, 2019 - 01:51 PM GMTBy: QUANTO
A lot has changed over the weekend. - G7 has been positive for risk. Trump expressed regret over his latest escalation of trade war. - China on its part said will negotiate. - No news on Iran - No bad tweets on FED
US seems to be retreating from world stage on many accounts and this will mean big changes in world markets. Initially it will be positive as it will be led by a imminent trade deal with China which could rip the equity markets higher and go to all time highs. But reality will set in later. Either ways, it makes no difference to us as our automated system is tuned for all kinds of markets.
Find the charts and setups.
A performance chart comparing percentage gains since the Fed meeting just before the 2016 US election. The break in momentum seems to be global and thus the chances of this being a major break in risk appetite is lower. Often bear markets will keep falling for a sustained period and not pause. Here we see a slow and pausing break.
S&P500 going back to 3000
S&P500 is headed to new highs. The triple support 2820/00 looks likely hold given the optimism from G7 summit. Even if the economy is not doing as great, markets are all about sentiment.
Earning yield at 4.7% is greater than US 10 year at 1.45%
The earning yield at 4.7% is attractive compared to treasury yields and other markets. If the environment of fear could dissipate, we see a sustained rally to 3020
Copper
A bellweather of global economy, copper prices have been on a decline since last year falling to 2.6 this month. There have been bounces but the demand from china is reducing which puts pressure on the stockpile.
Oil charts
Oil has been around the 54 -57 mark. There is significant risk of a downside break to 44.
SNB intervention
SNB has been intervening this month to selling the CHF to stop USDCHF from sliding. That may have reduced on friday.
US10Y years
The US 10year yield is falling to new lows to 1.450%.
Curve inversion
The yield curve remains inverted despite best efforts from leaders to paint a rosy picture. The 2 year yield remains higher than the 10 year yield and the spread seem to widening.
CBO deficits
CBO updated statistics on friday is a shocker. The US is set to run a 1 trillion deficit over the next 10 years. US debt will continue to grow as deficit is expected to be financed by overseas borrowing.
German confidence is dipping to new lows as the IFO index plunged to 7 years lows. However the G7 on the weekend could suggest we could see the return of some optimism.
Oil Reversal
Oil has had a sharp reversal as trade war resolution is starting to play up on screens as London gets underway.
Risk Reversal
The S&P500 futures is looking solid in EU today as Volatility has eased and markets are starting to restalish its upward momentum.
US Durable goods
US durable goods orders expected to rise by 1.2% MoM nominally, works out at 4.3% YoY in real terms for July (red).
Dollar Index
Dollar index has shown a laziness to close above 98.5. This should be taken as hyper bearish because we would not like to see bearishness at such decade highs of 98.5. The index moved sharply lower in Asia before forming a reversal pattern. Normally we would have back the bullishness but unless we see a close above 98.5, we would not advise to go long the dollar. If we close for 3 consecutive days below 98.5, we would like to advise to go long the EURUSD.
XLF is a key ingredient for risk markets and has been lagging behind. The banking industry has been mauled by the lower yields. This has had a dampening effect on XLF.
US10 year has dropped further to 1.450 % from 1.650%
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Source:https://quanto.live/bond-markets/the-big-turn-for-risk-markets-as-us-china-steadies-to-a-deal/
By Quanto
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