vrijdag 28 juli 2017

"Market Playbook" For An Anything-But-Quiet August

Traders were suddenly 'woke' from their sleepy summer 'this is a no brainer melt up' doldrums this week by some sudden vol... for no good reason. As former fund manager Richard Breslow notes, however, there is a 'playbook' for what happens next as the market seems destined to test technical support and resistance levels. Via Bloomberg;
# It’s Friday and the middle of the summer. You’d think it would be one of those days where people want to get in and get out with a minimum of fanfare. But that’s not how it feels nor how it’s playing out. We’ve had some decent ranges across instruments. Volumes have been healthy and running above the average for the last couple of weeks. There’s no question that a lot of assets are in play. Suddenly, you have to be asking yourself if casually selling volatility is such an obviously smart strategy...


Next week August begins and if there’s one thing we’ve learned over the last few years, it’s certainly not guaranteed to be a snoozer. The price levels that we saw before Chair Yellen’s dovish tilt during her Congressional testimony have become important technical resistance or support points for delineating market sentiment. They have all held since and shouldn’t be forgotten. But they’re too far away to guide trading today and into next week. Not to fret. They’ve been supplemented by new and closer levels. Hurrah, we have an interested market and close pivots galore to play with.
# Markets moved on the FOMC this week. Another dovish lurch? See you in September? Maybe. But it’s not at all clear. German inflation numbers raise the question of whether it really was the time for everyone to go all meek. In one of those inexplicable shifts in attitude, we’ve gone from traders thinking the central banks were getting ahead of themselves to raising the very real possibility that they risk falling behind. Do we really need to see the whites of their eyes before having any faith in the future? After the latest meeting statement, the dollar got whacked. But then it did a significant thing. It tried to rally and made it all of the way back to pre- announcement levels before falling away. Retesting a break-out and holding should put that price (circa 94.10 for the DXY) firmly on your technical radar. And it’s close, which is perfect as a pivot and for our purposes...


Perhaps of even more immediate interest is that 10-year Treasury yields are back to testing their break-down level, courtesy of today’s European back-up. A move back above 2.33% puts 2.40% into play and, then, who knows?


Gold was courteous enough to boot off from $1250, a nice round number that’s easy to remember...


For S&P 500 futures, the reasons are different but the level clear. The E-Mini below 2475 looks squishy if not soft...


Back above and we can continue to believe that the powers that be have your back. As Breslow concludes, if you have to be here anyway, might as well make the most of what may prove to be an revealing insight into where we go next....