Pressure Cooking, A P Ralston (1977)
Good luck to those of us in the UK this week, heading into the kind of heat that the rest of the world experiences. Crazy stuff.
I have a dissertation due (first draft, second time around the degree circus) at the end of this week, so will keep it short:
A strong Friday equity close and the rally may have some more legs but under the hood there’s a lot of groaning with a few stocks doing the heavy lifting.
The bond market is telling us that the economy is going to nosedive over the next 6-12 months and although the market is always ahead of the game, it’s likely there is more downside to come before is starts to price in the recovery.
Sunday Twitter Poll
FinTwit is bearish.
(Of the last 18,000 tweets containing SPX, $SPY or $ES, those including bull/bulls/bullish/bear/bears/bearish extracted, then % totals of each. Started April 2022; plan to track % of times Twitter is correct compared to the following weekly close. Tracking data will be added after the first 20 weeks.)
Roadmap
Thursday - BoJ and ECB interest rate decisions. Rocks and hard places everywhere.
Friday - preliminary PMI’s. It’s obvious growth is slowing so poor reads will likely not move the needle much and any glimmer of hope will help a rally.
Longer term, yuck:
(though note that China is propping up the Global Composite - one to watch for a turn)
Equities:
The 4k mark: will it, won’t it? No-man’s land just now.
I’m thinking:
FX:
DXY had a wobble last week after EURUSD reached parity. Potential for pause time and some USD shorts to work out for a few weeks.
Precious Metals:
Makes nice jewellery, as long as you don’t mind it depreciating like a new car.
Trades Update
This has moved to a free Thursday trades record, also available (most weeks) on Substack:
Risk Index
Under 50 = bullish, over 70 = bearish, over 90 = potential correction within 6 months
The Risk Index is a combined read of the trends of 68 intermarket spreads and indicators, from credit spreads to car sales in Spain.
Note that the current bear market was signalled 10 months ago (see reference down the bottom of this post at start of this year here) so the expectation is that the Risk Index will become increasingly bullish the longer this move down lasts.
1-year lookback:
Nothing to get excited about on the long side yet.
Themes to Watch
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