Monthly

* this is not a trade recommendation and for educational purpose only. please do your own research.

Back To The Future – Back To Normal – Mega Market Rebound

MACRO

The core “market candies” remain at disposal

• mega global liquidity
• NIRP or ZIRP
• no taper in sight for the FED, ECB, BoJ, BoE. 
• RBA even increased their QE program by A$100bln
• vaccination program roll out progress good (except with the EU/Germany mess)
• daily cases globally fell to 3M low (incl Germany, Italy), though Malaysia and Thailand made a 12M new high
• the HF liquidation fear due to r//WSB spook washed away and gave a mega technical RiskON rebound this week while implied volatility absolutely crushed (VIX, VXN, VSTXX etc)
• see Dashboard tables/charts

US

• ISM PMI still strong near 59 (but slightly lower), new orders strong 61 (but 4M low), price component 12M high to 82, employment 12M high, Markit PMI moved to 12M high to 59.2
• Services NMI PMI 12M high to 58.7, new orders 6M high to 61.8, employment 11M high 
• NFP rebound to +49k, unemployment rate dropped to 10M low 6.3%, although that number never includes the PUA/PEUC jobless claims. There are still a total of 17.8mln claims
• Strong macro data overall and continue to support the reflation themes
• see Dashboard tables/charts

EUROPE

• Italy, Netherlands, Austria 12M high M.PMI, France 6M high. Germany 4M low but still at strong 57.1
• Services PMI as expected weaker in Germany, France, Spain. Italy was 3M high but still at only 44.7
• Italy without a snap election asked former ECB president Draghi to form a new government, lifted market spirits.
• The vaccination progress in Germany and the potential slower than expected re-opening and recovery was one attribute to a weaker EURUSD this week.
• see Dashboard tables/charts

TECHNICALS

RiskON Week

weekly performance

outright Momentum/Trend/Exhaustion snapshot

[ housekeeping : we will change this format slightly next week, will implement a weighted Momentum / Trend score and new scale ]

RATES

• US: with the RiskON momentum / rebound , treasuries fell again in yet another bear-steepening week. 3M LIBOR 2024-2025 closed 6-10bp higher, US5Y +5bp, 10Y +10bp, 30Y +14bp 1Y high. 2s10s curve moved to a new 4Y high, 5s30s even to a new 5Y high. UB futs settled -2% lower, ZROZ ETF -3.8%. 
• UK: BoE left the base rate unchanged, votes 9-0, left QE unchanged at £895bln. Didn’t go to negative rates as hope of successful vaccination program while daily cases falling fast and a re-opening soon led to hope for a quicker recovery than initially expected. GBP LIBOR STIR curve moved accordingly between +9/+12bp 2022, +13/+16bp 2023, +17/+19bp 2024. 10Y gilts dropped and yields settled +16bp wider.
• Europe: while Germany 10Y settled +8bp wider, Spain + Portugal +2/+3bp, the “Super Mario effect” led to a BTP rally, 10Y yields dropped -10bp. 

CREDITS

• very strong RiskON in credits as well
• CDX HY and ITRAXX XO -33bp and -27bp
• CDX Emerging mkt -17bp
• CDX IG and ITRAXX Main closed -5bp
• see Dashboard charts

FX

• Regaining DXY was one of the headlines this week after a -13% drop since peak Mar2020 and some first attempts recently for a rebound. This week DXY rallied from 90 to 91.60 before falling back to 91 Friday close. 
• Mirror image EURUSD fell towards 1.195 before rebound Friday close. 
• One of the biggest gainers in the FX landscape was Turkish Lira, which rallied +3.7% vs USD. Since Erdogan took the decisive action to replace the finance minister and the governor of the central bank, which raised twice they key interest rate substantially to defend the devaluation, the Lira rallied +21% vs USD (or USDTRY fell -18%). That is also one reason for the +60% gain in the TUR ETF since Nov (besides the global stock rally)

COMMODITIES

• Silver in the headlines with the media hyped SLV attempted short squeeze, apparently not driven by r/WSB gang, but these things spread like fire nowadays. Spot rose initially +18% and found strong old resistance at $30, then plunged -14% before slight recovery towards Friday close. Daily score is still long though.
• Gold heavy week, -5%, strong US$, very strong RiskON momentum
• NatGas with a very strong rally of +12% by week close on worse than initially expected coming weather.
• WTI surged +9%, Heating oil and Brent +7%. CL shows first signs in daily and hourly chart of short term overbought.

STOCKS

Monster RiskON week in review

• VIX spot from 38 (5.3% weekly vola) -17points to 21 (2.9% weekly vola), nearly halved the risk 
• VXN from 41 (5.6% weekly vola) to 25 (3.5% weekly)
• VIX term structure “collapsed” from backwardation to steep contango curve
• SPX strong rebound of +6%
• RTY outperformed, made nearly +10% off the recent low
• Nasdaq +7% off recent low
• XRT fell -10% after being at +3.3z score, mostly due to GME 
• reflation theme: COPX/GDX +7% last week 
• reflation theme 2: XES/GDX +9% last week 

SECTOR: Global 10Y Rates vs BANKS

Rising long end yields and bear-steepening on a global scale left a mark.

Samples below:

• New Zealand 10Y ~+100bp, ANZ Group +50% since Sep
• Australia 10Y +50bp, NAB +52% 
• Canada 10Y +60bp, BNS +30%
• US 10Y +70bp, KBE ETF +65%

spread/ratio Momentum/Trend/Exhaustion

…oh, One More Thing…

The GME saga ended in a textbook drama. The initial power of the r/WSB community got UBER-hyped. Keith Gill did his early homework and made a fortune (but also got very greedy). Great story for very few smart cookies in between (incl a handful HF), sad ending for the majority retail who bought late because of the hype. classic.

*  please forgive my grammar and articulation, not my mother tongue, just read between the lines and connect the dots 🙂

Das war’s , vielen Dank und good luck, Kai