The Mars Market Update — Live Research

The global risk market themes of short bonds and long equities held last week - these are the most overcrowded and leveraged one-sided trades we have seen in recent times. While we are not fighting these trends (having been on the right side of the short bond idea) I am alert to a sudden reversal.  Chasing one-sided crowded trades is fraught with danger - my preference is to fade the herd but I will remain disciplined in awaiting evidence of a turn. This is not a time for complacency! Last...

Last week saw the Dow finally confirm the SPX, Nasdaq and Russell 2000 push to new ATH's. Bonds continued lower for a hard test of our 116 key support for the TLT with yields testing major resistance. The DXY continued its corrective decline while commodities like Crude Oil and Copper rallied unexpectedly. Key themes to take note of this week include the FOMC and its impact on rates and the potentially escalating US/China trade dispute and its impact on risk. Are we setting up a period of...

Global risk assets are at a tipping point as US bonds approach important structural support. A combination of strong US economic growth, higher energy costs, increasing Treasury issuance and quantitative tightening all provide a fundamental backdrop to the rising rates story. From a technical perspective, we are fast approaching a make or break point for US bond markets - the cost and availability of global capital. Strategically from a bigger picture perspective, we remain bearish Bonds and...

Last week, we warned that US equity markets were forming potential ending wave patterns and the high beta indices reversed sharply lower. As we have been warning, investors have been moving down the risk curve as rates rise and liquidity declines - the fractures started in Emerging Market currencies and equities, pushed through to commodities, and are now slowly engulfing European and Asian equities. The US as stated previously is the best house on a bad street but the trend is ending. The...

Last week we saw a continuation of the 4th wave triangle thrusts we have been monitoring. Importantly, global equities did not participate in this latest rally as Emerging markets faltered and European equities were dragged down by its banking sector. There has been a lot of speculation that we are at the start of a new bull market trend - there is little evidence to support this assertion. Despite the expected latest push to new ATH's in the SPX, Nasdaq and Russell, I remain of the view that...

The summer grind continues as bullish triangles led the risk markets higher with no signs of a tradable top. The US$ started its corrective decline as expected which supported Emerging Markets and commodities across the board. Markets are poorly positioned for a near term US$ decline so we should expect a continuation of these near term trends over the next week. Remember, this US$ decline is likely to be corrective that leads ultimately to a much stronger dollar and resumption of risk-off...

Perspective - as global liquidity declines, capital flows to the best house on a bad street in a flight to perceived safety. The US capital markets have been the main beneficiary while Emerging markets and higher risk asset classes get liquidated. We are in a world of historically high and growing dollar denominated debt in a stagnating growth environment threatened by ongoing trade wars and geopolitical uncertainty. This is not the start of a great bull market - what we are witnessing is...

Last week equities and rates failed at resistance as expected as the Euro and Aussie$ broke down from their respective triangles. The strong US$ continues to pressure PM's while crude oil rallied from structural support as tweeted during the week. Our base case has been that this rally from the April lows was an ending wave. The SPX stalled at resistance late last week and reversed lower - we were looking for a failed test of the ATH's. One day doesn't make a trend change so we would like to...

Reviewing the markets over the weekend led to one conclusion - risk markets are trading at extremes. Markets are very long US equities while leadership is narrowing and a trade war beckons Markets are very short bonds into strong structural support Markets are very long US$ while the rally is ending Markets are very short PM's at support These are ALL crowded trades that are at risk of reversal. Recently we have been focusing on the Nasdaq as the leading equity market sentiment indicator. We...