How would you *feel* if I told you to buy more treasuries, buy dollars, and to short euros and….ahem…GOLD this morning?!
Oh shoot, now you’ve really done it! I’ll likely get flooded with hate mail this morning on that idea alone (shorting Gold). Remember, it was only 2 weeks ago we were telling you to buy MORE Gold at 1850….but now EVERYBODY loves it again at 1920!? Hmm. Purely emotional trade.
But, but, more stimulus is COMING! Really, well if you know that then the rest of the world knows that, and its highly likely that it’s all priced in – NOR does that change my outlook on Scenario 4 aka Growth/Inflation SLOWING in Q4. And….what if Stimulus doesn’t happen? Ever think of that possibility? Christine Lagarde….do you know who she is? She’s the head of the ECB, and if you haven’t heard of her it’s likely because she’s been living in the shadow of Mario Draghi in her first year as the ECB’s top economic troll. Lagarde spoke with the WSJ this morning and dropped a hint that the ECB had more work to do in terms of stimulus and interest rate cuts (even hinting at negative rates). Well, well, well, it looks like Jerome Powell and his dollar devaluing Fed constituents may have some stiff competition directly ahead.
Now, with that cat out of the bag, we do ultimately believe the Fed “wins out” in the end, but for the immediate to intermediate-term we think there’s a strong likelihood that the U.S. dollar concedes to the ECBs devaluing strategy. So today, like it or not, “short Euros” is in my playbook.
You have to embrace the uncertainty and the non-linearity of it all….
Rundown:
SPY +0.12%, NQ -0.20%, +0.77%
GER +0.86%, UK +0.31%, FRA +0.80%
Shanghai -0.20%, KOSPI +0.34%
VIX 28.19 +0.82% – that damn pesky VIX, they just can’t get it back to bearish trend. Remains BULLISH trend in our model.
Commodities:
Oil- will be a short in Scenario 4 – we haven’t shorted it YET, but it could happen today. Oil pressing the top of its range this morning +2.37%.
Gold- I don’t’ like it here, but who knows, maybe I’ll like it again tomorrow…remember we don’t chase gold, we buy it at the low end of our range, which today comes in at 1857! And upside to 1938. That’s 0.8% upside to 3.2% possible downside in the immediate-term in our book.
Dollar- signaling immediate-term oversold and has continued to make higher lows in our range calculations – something may be afoot in the currency space, as the euro signals “lower-highs”.
Buckle up, Q4 may get a little bumpy.
