“You have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a very short period of time. What you can’t afford to do is throw away your capital on suboptimal trades.”
Richard Dennis
EQUITY MARKETS – INDICES
Well, tech finally cracked, the AI trade specifically. OpEx week kept the S&P 500 pinned, so the action moved underneath it, everything else in the index rallied. Small caps didn’t care, they got none of that support.
From here it’s really quite simple, or it appears to be. If passive flows hold the index in place, this can run a while longer, violent rotation on both sides. But if the volatility suppression breaks, very little escapes the correction.
We’ve also got some international rotation. Korea’s KOSPI, Taiwan’s TWSE and Japan’s NIKKEI, all heavily levered to the AI trade, all weaker now, while Europe caught a bid, the DAX and the FTSE getting some support.
The bigger picture hasn’t changed, and won’t on its own. It’s still the AI trade at the center of everything, the enormous debt and the out of this world CapEx behind it, all backed by governments, all over the world.
That is why the growth story can’t be allowed to slow, not for long, because if it does, CapEx and earnings go, and the nominal value of savings, insurance and retirement accounts goes with them, straight into a recession loop.
So they keep printing it away, or “grow our way out of it” as they say, except you can’t outgrow a debt that is itself the source of the inflation.
And that is exactly where the US elections come into play, a new set of people and the AI money can dry up fast, with the bailout reaction coming too late, if at all.
Don’t get me wrong, the spending won’t stop, it’ll just go into other places. The K-shaped economy cycle only holds as long as the political will does.
So we stay ready. We go with the trends, hunting the next major trend from depressed levels, and there is almost none of that right now. Patience, we don’t chase a stalling tape. Trade what’s in front of us, hold what works, but otherwise we keep the powder dry, mediocre plays only get you that far.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• S&P 500 - UNITED STATES: uptrend ➝ sideways
• S&P 500 VIX - UNITED STATES: sideways ➝ uptrend
• NASDAQ 100 - UNITED STATES: uptrend ➝ sideways
• DOW JONES - UNITED STATES: downtrend ➝ sideways
• NIKKEI YEN - JAPAN: uptrend ➝ sideways
• DAX - GERMANY: downtrend ➝ sideways
• FTSE 100 - UNITED KINGDOM: downtrend ➝ uptrend
• MSCI EM - EMERGING MARKETS: sideways ➝ downtrend
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• S&P 500 VIX - UNITED STATES: downtrend ➝ sideways
• NASDAQ 100 - UNITED STATES: uptrend ➝ sideways
• RUSSELL 2000 - UNITED STATES: sideways ➝ downtrend
• NIKKEI YEN - JAPAN: uptrend ➝ sideways
• MSCI EM - EMERGING MARKETS: uptrend ➝ sideways
POSITIONING CHANGES SINCE LAST WEEK
• DOW JONES - UNITED STATES: negative ➝ neutral
• MSCI EM - EMERGING MARKETS: neutral ➝ negative
CHARTS OF THE WEEK :
FOREX
The dollar finally paused. The pound, the franc and the loonie, all escaping downtrends now. Still, where we go now is the political question, war, oil, the TGA account, a potential Fed flip. It may also be dependent on the AI trade, with some money flowing out of the US. As always, trends will tell us first.
Gold is still catching its breath. It stabilized last week, the positioning back to neutral, which means not many are long here. Still in a downtrend, so no longs in trading, but harvest and accumulation in the Gold Strategy.
Crypto is weakening, last week Bitcoin and Ether both rolled over into short-term downtrends, we’ll see if this cool-off will become a proper give-back.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• GBP/USD - BRITISH POUND: downtrend ➝ sideways
• CHF/USD - SWISS FRANC: downtrend ➝ sideways
• CAD/USD - CANADIAN DOLLAR: downtrend ➝ sideways
• BRL/USD - BRAZILIAN REAL: uptrend ➝ sideways
• BTC/USD - BITCOIN: sideways ➝ downtrend
• ETH/USD - ETHEREUM: sideways ➝ downtrend
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• NONE
POSITIONING CHANGES SINCE LAST WEEK
• BTC/USD - BITCOIN: neutral ➝ negative
CHARTS OF THE WEEK :
INDUSTRIAL METALS
The pressure finally reached the king. Copper rolled its short-term over to a downtrend, its positioning turning negative with it. May flip back, not the strongest signal just yet, but we’re careful. Tin, zinc, aluminum, lithium, all weaker, the precious metals as well, all heavy now.
Where we go from here is still largely a political question, tied to the energy crisis, hence the slowdown in the global economy, same as pretty much every week since March. In the short term anything can happen, so we stay flexible.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• COPPER - UNITED STATES: sideways ➝ downtrend
• TIN - LME, UNITED KINGDOM: sideways ➝ downtrend
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• ALUMINUM - UNITED STATES: sideways ➝ downtrend
• ZINC - LME, UNITED KINGDOM: uptrend ➝ sideways
POSITIONING CHANGES SINCE LAST WEEK
• COPPER - UNITED STATES: neutral ➝ negative
• TIN - LME, UNITED KINGDOM: neutral ➝ negative
CHARTS OF THE WEEK :
ENERGIES
What can we say, everything just grinds higher, energy crisis is here.
Short-term direction stays dependent on the political decisions, the Middle East, the Houthis and the Saudis, still Russia, but it doesn’t look like it’ll be over anytime soon. Escalation trap continues.
But even if they somehow come to terms tomorrow, it won’t change the facts, the damage to production capacity and the depletion of reserves is done, and it’ll be with us for years, right into what would anyway be an underinvestment crisis, the one set to bite by the end of this decade.
The easy money has been made, but there are still plenty of opportunities here for patient traders and investors, upstream, midstream, downstream, services, you name it. Our core long-term energy equity positions stay on.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• CRUDE OIL - UNITED STATES: downtrend ➝ uptrend
• DIESEL - UNITED STATES: uptrend ➝ sideways
• GASOLINE - UNITED STATES: uptrend ➝ sideways
• ETHANOL - UNITED STATES: sideways ➝ uptrend
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• NATURAL GAS - UNITED STATES: sideways ➝ uptrend
POSITIONING CHANGES SINCE LAST WEEK
• CRUDE OIL - UNITED STATES: neutral ➝ positive
CHARTS OF THE WEEK :
TREASURIES
Beatings will continue until morale improves, so, did it? Looks like a pause, finally. The whole curve stopped falling last week, every tenor back to short-term sideways, the bounce we flagged in $TLT showing up right across the board. Whether it holds is the real question.
The path stays clear as long as the energy crisis is unresolved. If they reach some kind of arrangement, we’ll likely see a longer pause, but it has to be real, and it has to hold, at least for a longer while. Short of that, oil and yields will find a way to cause a serious global slowdown on their own, and where exactly that breaking point is, we’ll see.
As to interventions, the bond markets are simply too large to be moved that easily, it may take trillions, like in 2020-2021. Nothing structural has changed, more deficits, more issuance, more money supply. We still take no longs here.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• 2-YEAR T-NOTE - UNITED STATES: downtrend ➝ sideways
• 5-YEAR T-NOTE - UNITED STATES: downtrend ➝ sideways
• 10-YEAR T-NOTE - UNITED STATES: downtrend ➝ sideways
• 30-YEAR T-BOND - UNITED STATES: downtrend ➝ sideways
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• NONE
POSITIONING CHANGES SINCE LAST WEEK
• NONE
CHARTS OF THE WEEK :
AGRICULTURE
Same story as always in a bull market like this, sharp moves to new highs then violent pullbacks to higher lows, it’s just how they behave.
Two ways to play it, swing the individual commodities short-term, or hold long-term and take the good with the bad of the bull run. Both depend on the trader’s psychology. Our core longs stay where they are. And we might just be there, near another long trade opportunity, we’ll trade that too.
The bigger picture stays the same, and it points up. The fertilizer and energy damage is done, and El Niño is still out there. We stay long where the trends hold, and let the prices move as far as necessary to incentivize production. The crush spread setup we’ve got our eye on is still moving, way ahead of our 2027 base case, we won’t complain, it’s working.
And on fertilizer equities, they typically move well into an ags bull market, and that urea medium-term turn is the kind of thing we watch. Farmers need the money to buy them, so they need to sell their production at high prices into the future. Right now they’re struggling, fuel prices through the roof, and it’s usually right here that governments step in, subsidies, tax breaks, that’s the tell, it’s where the fertilizer cycle begins.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• ORANGE JUICE - UNITED STATES: sideways ➝ downtrend
• COFFEE C - UNITED STATES: sideways ➝ uptrend
• SOYBEAN MEAL - UNITED STATES: uptrend ➝ sideways
• CANOLA - CANADA: uptrend ➝ sideways
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• UREA FERTILIZER - UNITED STATES: sideways ➝ uptrend
• COFFEE C - UNITED STATES: downtrend ➝ sideways
• CORN - UNITED STATES: uptrend ➝ sideways
POSITIONING CHANGES SINCE LAST WEEK
• CATTLE - UNITED STATES: neutral ➝ positive
CHARTS OF THE WEEK :
That’s it for now. Stay safe out there!
Kacper Piotr Kaminski, Cerlogic Markets Research – intel.cerlogic.com
This publication is for informational and educational purposes only and does not constitute investment advice. Markets involve risk, and every participant is responsible for their own decisions.