Hurricane Season

The Quotedian - Vol VI, Issue 63 | Powered by NPB Neue Privat Bank AG

“History Doesn't Repeat, But It Often Rhymes”

— Samual Clemens (aka Mark Twain)

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DASHBOARD

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AGENDA

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CROSS-ASSET DELIBERATIONS

{Turbo-Note this busy Friday morning}

As I have been saying since last month, August to October is not only Hurrican Season in the Caribean, but usually also for financial markets. This is the seasonal chart of the VIX I showed at the time:

Scroll down to the COTD to see how that ‘prediction’ has been going, even though as an avid reader of The Qutoedian, I suspect you already suspect…

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Let’s have a quick look at yesterday …

Clearly, “Buy the rumour, sell the fact” could have been yesterday’s leitmotif. Of course, Nvidia with its earnings beat was the talk of town yesterday and it all started very well until profit-taking set in, with the stock ending where it had closed on Wednesday:

However, as other stocks were closely following the fate of NVDA to the upside, they also did so to the downside, just more ‘pronounced’. Marvell Technologies for example:

WOW! That is quite an outside reversal candle there, usually with short-term bearish implications…

This resulted in the Nasdaq being rejected at the 50-day moving average (blue line) and a throw back right to the lower end of the trend channel:

Bulls have some work to do today …

The S&P market map shows how difficult the season suddenly turned;

Not one sector ended in the green:

The S&P 500 was rejected exactly at the resistance which was necessary for the bulls to take out to reinstate the uptrend I had highlighted yesterday:

This chart shows beautifully how simple trendline drawing can sometimes help you keep out of trouble. Also, we now have an upper and lower line in the sand, which will guide us for the short-term trends.

Asian markets this morning are following Wall Street’s template and are showing some important retreats:

Bond yields on the US 10-year Treasury saw a rebound yesterday, but Wednesday’s monster move still labels the recent breakout as a false alarm:

Two things to watch today going into the Jackson Hole retreat.

1. Professor 2-year yield:
   

   

   
   

2. And the VIX equivalent of the bond market, the MOVE:
   

   

   
   

Neither is positioned for a nasty surprise, so let’s hope their relaxedness is justified.

Whilst bond markets are seemingly calm ahead of Jackson Hole, yesterday’s rise in the US Dollar could suggest some expectations by FX traders for a hawkish surprise:

One trade I continue to like is long the Japanese versus either the Euro or the Pound Sterling. Here’s the EURJPY version, which is also showing an intersting technical setup, via divergence between price (upper clip) and momentum (lower clip):

I need to cut short here today, but just as a head start and talking trades I like, my intention is to introduce a new section, which will monitor some shorter-term trading ideas. Do you think that would be a good addition? Let’s poll:

I leave you three days to decide ;-)

Enjoy your weekend and remember: Four months to X-mas!!

André

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CHART OF THE DAY

As mentioned at the outset, the period between August to October tends to be extra volatile for financial markets and 2023 is no exception.

One way to measure equity volatility is the CBOE S&P 500 Volatility index which derives market ‘vola’ from option quotes on the S&P. Here’s the update on how it is going this year:

No scroll back up and re-read the QOTD …

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DISCLAIMER

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• The views expressed in this document may differ from the views published by Neue Private Bank AG

• Past performance is hopefully no indication of future performance