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January 28, 2023 | Trading Desk Notes For January 28, 2023

FOMO Alert! The Nasdaq had its highest weekly close yesterday since September, up ~13% from the 27-month lows made last October. This week’s close was 28% below the All-Time High made in November 2021. Inflation is falling and is expected to keep falling, so the Fed is expected to increase short rates (only) 25 bps this […]

January 21, 2023 | Trading Desk Notes For January 21, 2023

  The Anti-dollar trade Last week I wrote: Gold bugs have believed for years that gold is the original Anti-dollar, but lately, the Euro currency has become known as the Anti-dollar…If a currency trader has a negative view of the USD, buying EURUSD is the go-to trade.   But if a trader/investor had a negative view of […]

January 14, 2023 | Trading Desk Notes For January 14, 2023

Markets are expecting the Fed to cut rates this year, but the Fed says, “Don’t count on that.” This is the current SOFR (Secured Overnight Financing Rate) forward curve. It trades at a discount to par (zero interest rates), so a price of 95 implies a 5% rate. This chart shows that the market expects […]

January 7, 2023 | Trading Desk Notes For January 7, 2023

“What’s the Fed going to do?” was the Big Question in 2022, but it won’t be the Big Question in 2023 The Fed raised short-term interest rates aggressively in 2022. The yield on the 2-year Treasury soared from ~0.9% in early January to ~4.7% in November – the highest yield in 15 years. Looking one […]

December 31, 2022 | Trading Desk Notes For December 31, 2022

The Financial Times: Global Stock and bond markets lost more than $30T in 2022 The S+P more than doubled (up ~120%) from the Covid Panic lows in March 2020 to the All-Time Highs in January 2022 as a combination of aggressive monetary and fiscal policies flooded markets with “money,” drove risk assets higher and spawned unforgettable acronyms like […]

December 17, 2022 | Trading Desk Notes For December 17, 2022

Market sentiment: the Big Question has changed For the past several months, the Big Question has been, “When will we get Peak Fed?” The sentiment was that Peak Fed would be a “green light” buy signal, and risk assets were bid up in anticipation of that magic moment arriving.   More recently, another Big Question began to weigh on market sentiment, “When will […]

December 10, 2022 | Trading Desk Notes For December 10, 2022

Crude oil and gasoline prices hit 12-month lows WTI, Brent, and Nymex gasoline front-month futures traded at their lowest prices in twelve months this week. Crude oil intra-market spreads also demonstrated weakening demand, with nearby months now in contango (prices for deferred delivery are higher than spot prices) after more than two years of backwardation. Share […]

December 4, 2022 | Trading Desk Notes For December 3, 2022

Markets react to a “slowing” Fed Leading up to Powell’s scheduled Wednesday speech, some market participants were likely positioned for a re-appearance of “tough-guy” Powell – the man on a mission to bring down inflation and damn the consequences.   But Powell sent those participants scrambling to reverse their positions when he said, “it makes sense to moderate the […]

November 26, 2022 | Trading Desk Notes For November 26, 2022

The DJIA closed at a seven-month high this week The DJIA closed higher for seven of the last eight weeks. It rallied ~5,600 points (19%) from its two-year lows on October 13 and is now only ~7% below its January All-Time Highs. All of the stock indices had a terrific rally from the March 2020 Covid […]

November 20, 2022 | Trading Desk Notes For November 19, 2022

The “too far, too fast” moves have stalled In several of my Notes over the past few months, I’ve made the point that traders have been hunting “Peak Fed Hawkishness” – because they believe that will the best time to “Buy The Dip.” I’ve also made the point that they’ve been hunting for that “magic moment” without success – because Jay […]

November 12, 2022 | Trading Desk Notes For November 11, 2022

Lower-than-expected October CPI inflation inspired HUGE rallies in stocks, bonds and currencies Markets have been searching for “Peak Hawkishness” since June – without success, as Chairman Powell made clear in his press conference following the FOMC meeting last week. But – the downtick in various CPI metrics on Thursday caused markets to believe the Fed will “reduce the […]

November 6, 2022 | Trading Desk Notes For November 5, 2022

Inter-market relationships I’m a Macro tourist: I constantly monitor intra-market and inter-market relationships and correlations. It’s an old habit, and it often leaves me more perplexed than enlightened, but sometimes I find clues that help me see a trading opportunity.   I look at correlations as a trader, not an economist or statistician; in other words, […]

October 30, 2022 | Trading Desk Notes For October 30, 2022

October 13, 2022, was a Key Turn Date A Key Turn Date occurs when several different markets reverse course on (or around) the same date. The fact that several different markets “pivot” simultaneously indicates that something significant has happened – for instance, there has been a significant “shift” in sentiment or a critical geopolitical event. On October 13, the US CPI report was […]

October 23, 2022 | Trading Desk Notes For October 23, 2022

Markets may be turning I’m writing the TD Notes on Sunday afternoon this week. I left my desk last Thursday morning, flew to Calgary to attend Joseph Schachter’s fantastic annual energy conference (more on that below), and got home Sunday afternoon. The Notes will have to be shorter this week – I’ll comment on several […]

October 15, 2022 | Trading Desk Notes For October 15, 2022

Will the Fed pause/pivot before or after “something breaks?” The Fed is determined to continue tightening monetary policy until inflation falls. Stocks and bonds have fallen sharply, and the US Dollar has soared as inflation has remained “hot” despite the Fed’s continued efforts.   The market “knows” (and we assume so does the Fed) that “something will break” as a result of […]

October 8, 2022 | Trading Desk Notes For October 8, 2022

WTI crude oil soared ~$17 (22%) from last week’s low to this week’s high/close Front-month WTI futures closed ~$76 on Monday, September 26 – the lowest level since the first week of January. The damage to the Nordstream pipelines was discovered that day. Since then, prices have rallied sharply and closed this week at ~$93.30. The […]

October 1, 2022 | Trading Desk Notes For October 1, 2022

“The most important thing” for the financial markets the past few months, and especially for the last three weeks, has been the realization that the Fed is DETERMINED to get inflation down and “break the back” of future inflation expectations. Credit markets US bond yields YTD have had the steepest rise ever – with 2/3 of the move […]

September 24, 2022 | Trading Desk Notes for September 24, 2022

Is this as bad as it gets, or is the “worst” yet to come? In last week’s TD Notes, I declared, “Expectations of more Fed tightening is the “most important thing” for financial markets.” That was after risk assets took a swan dive following Tuesday’s CPI data. This week, the swan dive continued, especially after the […]

September 17, 2022 | Trading Desk Notes For September 17, 2022

Expectations of more Fed tightening is the “most important thing” for financial markets Markets reacted dramatically to the “stronger than expected” CPI report Tuesday morning. The DJIA futures dropped ~800 points in five minutes and was down >1,650 points later in the day. Friday’s low was ~2,150 points below Tuesday’s high. It was the biggest weekly loss since the […]

September 10, 2022 | Trading Desk Notes For September 9, 2022

Trading against sentiment extremes One of my favourite trading questions is, “How much is already in the price?” Market sentiment has recently become very negative, and with good reason; the “news” has been bad, and markets have priced in the bad news with higher interest rates, lower stocks and commodities and a US Dollar at 20-year highs. I think markets have […]

September 3, 2022 | Trading Desk Notes For September 3, 2022

Demand destruction requires higher for longer. The DJI is down >2,000 points since Powell made it “perfectly clear” in his August 26 Jackson Hole speech that the Fed is determined to do “whatever it takes” to bring inflation back down to 2%, regardless of the combination of factors which caused it to rise substantially above the Fed’s target. The […]

August 27, 2022 | Trading Desk Notes For August 27, 2022

Powell was more hawkish than expected – stocks, bonds, and gold tumble – USDX hits a new 20-year high Powell’s Jackson Hole speech on August 26 was much more hawkish than markets had expected. He said that the Fed is determined to get inflation back to its 2% target and that “restoring price stability will likely require maintaining a […]

August 20, 2022 | Trading Desk Notes For August 20, 2022

Will markets get “back to business” with a BANG after Labor Day, Sept 5th? We are in the “silly summer season,” and the “adults” are away. Trading volumes are light, but my veteran trader’s intuition tells me that markets may get “back to business” with a BANG once we get past Labor Day.   September will bring “winter” into focus – especially concerning soaring […]

August 13, 2022 | Trading Desk Notes For August 13, 2022

Global stock markets continue the rally from the June lows, S+P up ~18%, NAZ up 23%, AAPL up 33% The S+P, DJI and VTI (Vanguard total stock market ETF) have recovered >50% of their decline from the January All-Time Highs to the 20-month lows made around the mid-June FOMC meeting – when the Fed raised […]

August 6, 2022 | Trading Desk Notes For August 6, 2022

Markets that don’t fall on “bad” news probably go higher My macro bias over the past few weeks has been that inflation would stay higher for longer than markets were pricing. I thought stock indices were in a bear market rally, based on the notion that Peak Fed had come and gone with the June […]

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