Chart of the Day - little help?
Yesterday I was out to a charity golf event. The course is large enough that there was another event at the same location. Both terrific causes - college scholarships for deserving & needing kids as well as children's cancer. There were quite a few people there to enjoy a day of camaraderie & competition but mostly there to give a little help where it is needed. Based on the generosity & mood of the people on hand, I still do no see a recession in the part of the Midwest where I reside.
This is a bit ironic too because they news in the mkts of late, & even the news in the mkt yesterday, wasn't that great. Yet the mkt got a little help. In fact, the mkts have been getting a little help from a number of places lately & perhaps what we are seeing is a reduction in the odds of the far left tail, which are leading to covering of risk positions.
The first place we saw help last month was from the BOJ which intervened in the JPY FX mkt to stabilize the currency that was under pressure & leading to other devaluations in Asia. We spoke about the importance than as the JPY trade & Japanese flows help support many mkts.
We also saw some help by the Chinese authorities that intervened in the offshore CNH mkt again to provide some stability. That mkt had breached the critical 7.00 level and has rebounded nicely the last week. Another layer of support in a shaky area of the mkt.
Then we saw the BOE support the UK Gilt mkt to help pensions & pensioners. I wrote more about this in my Stay Vigilant blog this week. The 30 yr bond mkt was trading like a meme stock & the BOE provided support. This support was augmented by the Truss govt backing off the tax cuts (really the repeal of tax hikes) for top earners added a sense of a little more fiscal austerity.
Then, the US mkt got some added support from an unlikely place - bad economic news. Recall we asked yesterday what were we rooting for. It seems we were rooting for slightly worse than expected growth numbers with a materially falling ISM price index. This added help because it led traders to price in the peak of Fed policy in December of this year. Recall we had discussed the twin peaks narrative before? There was a sense yesterday the twin peaks are here.
We have said for 2 months how bearish positioning is. Positioning is not enough of a reason to buy. It needs a catalyst. The catalysts is the intervention of the authorities or the assumption the authorities are getting out of the way at least. A little help was all the bulls needed to take control back in this tape. The fact that we are beginning Yom Kippur only adds to the catalyst to buy.
Much like the organizations we supported yesterday, the mkts need more than a little fincl support. They need time and talents to help sort thru the issues. For now, we will enjoy that we got some help and perhaps we have seen the worst for now. We still need to ...
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Still gotta… Stay Vigilant! Great piece today :) Great examples of the supports that are acting as catalyst right now