More and more are jumping on the "sell in May and go away" bandwagon but for good reason. As U.S. stocks base around in short term trading awaiting more cues about a potential June rate hike from the April FOMC minutes to be released later today, the big players have their eye on the bigger picture.
This is something we've talked about on these pages, and something we buy, on the caveat that technical factors turn conducive. The month of May has historically heralded volatility in the financial markets. Seasoned traders and investors understand the value in keeping an eye on the big picture, soaking it in, and making more informed decisions from there.
April FOMC minutes: Fed likely to hike rats in June should data improve.
Dollar is higher post release.
Bulletin headlines:
• MOST FED OFFICIALS SAW JUNE HIKE `LIKELY' IF ECONOMY WARRANTED
• FED: RANGE OF VIEWS ON WHETHER DATA WOULD SUPPORT JUNE HIKE
• FED: MANY OFFICIALS NOTED GLOBAL RISKS NEED `CLOSE MONITORING'
• FED: OFFICIALS WANTED TO KEEP `OPTIONS OPEN' FOR JUNE
Key pointers:
• Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June.
• Many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring. For these reasons, participants generally saw maintaining the target range for the federal funds rate at ¼ to ½ percent at this meeting and continuing to assess developments carefully as consistent with setting policy in a data-dependent manner and as leaving open the possibility of an increase in the federal funds rate at the June FOMC meeting
• Some members expressed concern that the likelihood implied by market pricing that the Committee would increase the target range for the federal funds rate at the June meeting might be unduly low
• Many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring
• Regarding the possibility of adjustments in the stance of policy at the next meeting, members generally judged it appropriate to leave their policy options open and maintain the flexibility to make this decision based on how the incoming data and developments shaped their outlook for the labor market and inflation as well as their evolving assessments of the balance of risks around that outlook.
• Some participants noted that global financial markets could be sensitive to the upcoming British referendum on membership in the European Union or to unanticipated developments associated with China’s management of its exchange rate
• A few cited concerns about rapidly rising prices of CRE, including multifamily properties, or about illiquidity of the assets of some mutual funds
We made money post-FOMC, as did our clients. Pretty good week so far. As usual, FOMC was a bug mover across all asset classes, including equities and FX. A June rate hike seems probable now, despite the U.S. economy not performing exactly spectacularly. What immediate effects this had on the markets are shown below:
The aftermath post April's FOMC minutes: Stocks down (risk off), USD strength (as we forewarned), yield curve flatter (rate hike discount), gold down (again, as we forewarned).
Most importantly, June rate hike odds per the FF futures market is currently above 30%, from lows of 4% immediately after 28 April's FOMC statement.
Still, too early to say "told ya so", more waiting. Portfolio long USD exposure doing well.
More and more are jumping on the "sell in May and go away" bandwagon but for good reason. As U.S. stocks base around in short term trading awaiting more cues about a potential June rate hike from the April FOMC minutes to be released later today, the big players have their eye on the bigger picture.
This is something we've talked about on these pages, and something we buy, on the caveat that technical factors turn conducive. The month of May has historically heralded volatility in the financial markets. Seasoned traders and investors understand the value in keeping an eye on the big picture, soaking it in, and making more informed decisions from there.
It's good to be right again. This time, we were right about just about everything we were expecting. Yesterday's release of the April FOMC minutes cemented the strong dollar (weak everything else) trend for the short term, leading to a storing selloff in the precious metals complex, with silver crashing in Thursday trading and gold following suit.
We published a article titled "Sell In May & Play it Safe" this past Sunday, when we advocated derisking, and staying liquid (buy cash, safety, and shun risk). We also commented that should technical factors align, we would be willing sellers of the precious metals. In short, we had already turned bearish risk, gold, oil and most commodities, while bullish the U.S. dollar. We couldn't be more right.
To wit: "downside skews in risks make a derisking maneuver potentially more rewarding than chasing beta...
As such, we have shifted our bias to the short side of risk. The positions in our portfolio have partially reflected this change in view and will continue to do so as the situation evolves.
... on a beta-adjusted basis, we expect equities, precious metals, and the dollar (USD FX crosses) to be hit the hardest. A highly levered play would be to short the PMs on momentum..."
We don't just trade Forex, we trade (and make money) off equities too...
Below are 3 of our SPX CFD trades sent out to our signal subscribers. We trade the SPX most often as compared to the other stock indexes - and it has provided a strong return for us since the beginning.
A wild week this has been. After basing in anticipation of Wednesday's release of the April FOMC minutes, the markets have been singed with volatility from all angles. The main theme has been strength in the U.S. dollar, as the market now prices in a higher chance of a June hike, after vastly discounting it as a near impossibility.
Strength in the greenback has hit equities and commodities the hardest, along with EMFX and most other DMFX (except the GBP). Treasuries are unchanged for the long end but the short end is down (short yields are higher). Gold and oil (commodities in general) suffered worst, while U.S. stocks were choppy but still ended the week down.
In the business of Trading & Portfolio Management, results speak louder than words.
In the last 9 months, financial markets have been extremely difficult to navigate, let alone profit from. Despite the savage volatility that traders have been battling against, we are both happy and proud to say that we have done well in relative and absolute terms.
Our main actively managed portfolio is up +67% as of 20 May 2016 (roughly 8 months and 5 days since inception). There were periods of drawdown, as is to be expected with any moderately-levered trading account. Very few traders are able to achieve such results on an account size similar to ours.
Many of our Premium Signals Subscribers have benefited from our trading signals, because they took the leap of faith in us. You can too.
We're no-nonsense traders that want to help traders learn and improve by actually trading with real capital whilst being aided by our Premium Signals. It's important to note that we trade whatever signals we send out, so there's no conflicts of interest between our clients and us.
We have been away from this thread awhile now, busy with new material, content and of course, trading signals.
So far, all so good. The first half of 2016 has sailed on by, and the markets remain generally trendless, yet dangerously volatile. To combat this, we have had to switch strategies to ensure that we are not exposed on any particular trade for too long. Long-term trades are simply not worth the drawdown in markets like this.
Near the end of the month, the UK will decide whether she remains a part of the European Union (UK). In other words, Brexit, or Bremain?
This is just one of many crucial, key market events that will take place in June. Given that this month concludes the first half of the year, we thought it'd be fitting we bring you some of the biggest event risks June will bring.
Get ready and mark your calendars.
From the article:
'The biggest risks in June (in our opinion) will be the EU referendum by the UK in the later part of the month, the June ECB monetary policy decision and press conference, the June FOMC statement and interest rate decision, and lastly the BoJ's monetary policy decision.'
New opinion poll results surfaced in Britain Tuesday showing a 47% vote for leaving the EU (Brexit), and a 44% vote for remaining in the EU (Bremain). The news sent GBP crashing 130 pips against the USD and shockwaves across risk markets will global indices all down on the day and for the week. While such poll results are questionable, the consensus is that the Brexit vote is quickly catching up to the conservative.
Regardless of results, the UK referendum is surely one of (if not the most) the nuggets event risks in June and markets will likely continue to trade wildly on every ebb on this event."
"The best and worst performing global financial assets in May and YTD (in both local currency and USD terms) as analyzed by DB:
May was a month of decoupling: oil decoupled from the dollar, and global risk decoupled from the once again sharply devaluing Yuan, but most notably May was a month where Fed rate hike expectations repriced midway through the month. Markets largely took the move in their stride and reversed a difficult start to the month. Having said that we saw evidence of the repricing with dollar strength and EM/Gold weakness a theme. In fact for equity markets in particular the old adage sell in May and go away was looking relatively apt for the first week or so into the month before sentiment turned positive, seemingly supported by a combination of increasing comfort that the market can accommodate Fed tightening, higher oil prices, positive news from Greece and another decent performance for European Banks.
Looking at the winners and losers for the month one thing which stands out is the relative performance between local currency performance and US Dollar hedged performance during the month such was the strength of the Greenback. That was certainly the case with equity markets where in Europe in particular markets were generally up between 1-3% in local terms with banks in the middle of that range. With the Euro weakening 3% during the month however, on a USD return basis we see most European equity markets finish flat to slightly negative. It was a similar story in credit markets too where following two decent months of performance (on the back of the ECB CSPP announcement) May saw Euro indices eking out more modest gains of less than a percent in local terms in May with financials the relative outperformer. Looking at these in USD terms though results in most European credit indices down 2-3%. Performance was more impressive then for the S&P 500 (+2%) and higher beta US credit indices (+0.5%).
Further afield the top of our May leaderboard is headed by the performance for Greek equities (+11% local, +8% in USD terms) which rallied following the latest positive developments with regards to the bailout. Thereafter its WTI (+7%) and Brent (+5%) which rank second and third, extending what has essentially being an ongoing rally since mid-February now. Corn (+6%) also had a strong month. Developed sovereign bond markets sit in the middle of the pack although with concerns about Brexit starting to abate, it was Gilts (+2% local, +1% in USD terms) which outperformed. Finally the bottom of the leaderboard sees Brazilian equities (-10% local, -15% USD terms) prop up the rest as the political situation came to a head. Elsewhere Gold (-6%), Silver (-10%) and Copper (-8%) all suffered with the Fed repricing. EM equities and bonds (-4% and -5% respectively) also succumbed for the same reason.
Taking a look at year-to-date performance, its still commodity markets which are dominating the top of the leaderboard. Indeed in local currency terms the top five has WTI (+33%), Brent (+19%), Silver (+15%), Gold (+15%) and Corn (+13%) hogging the limelight, although if we flip to USD terms then Brazilian equities (+23%) and Russian equities (+19%) jump to second and fourth respectively. The impressive rally for the Yen (+9%) is still a standout while the overall performance for credit continues to be strong. Indeed in local currency terms we see US indices up between 3-7% this year, led by HY while European indices are up between 2-4%. Theres a familiar look to the bottom of the leaderboard with the Shanghai Comp (-17% local, -19% USD terms) the biggest outlier. Italian equities (-14% local, -12% USD terms) and European banks (-14% local, -12% USD terms) are still down double digits although have bounced back from how they ended Q1."
BIGGEST NFP MISS IN HISTORY! No one expected this even in their wildest most evil dreams! May NFP printed a mere +38,000 vs. expectations of +164,000, and down from April's already miserable +123,000 (revised lower from +160,000)!
Everything else missed or was inline at best. Only the U3 unemployment rate beat by falling to 4.7% vs. expectations of 4.9% and down from April's 5%, but this was due to massive shrinkage in the labor force (participation rate fell once again).
The USD is down sharply against all currencies, and precious metals (gold, silver, ect...) are surging. More updates to come.
May's NFP uber miss was not only the largest in history but also puts the key jobs indicator at the lowest since September 2010.
When we first saw the 38,000 print, we thought it was an error with our news feed. But no, the U.S. economy added only 38,000 non-farm jobs in May, the lowest since September 2010, and the biggest miss on record. It's really hard to overstate how morbidly bad May's payrolls were. It is, however, commensurately easy to kiss a June rate hike by the Fed a sweet goodbye.
Everyone was shocked. We were definitely shell shocked, because we couldn't believe just how bad the numbers were. Neither could the markets.
Flash crashes and surges sprouted the instant the first HFT algos recognized that it was really an epic disaster. Yes, here we are 5 days late to reporting on this monumental event; but you see, we have more to bring to the table, now that 3 trading days have already passed for the dust to settle.
This coming Thursday, 23 June 2016, the United Kingdom will vote on a historical referendum deciding on the status of its European Union (EU) membership.
For the last 2 years since 2014, the UK parliament, led by Prime Minister David Cameron have promised a public referendum on Britian's EU membership.
Britain's relationship with Europe has always been one of contention, and many have long been awaiting this once in a generational lifetime opportunity to voice their opinions through the democracy of a vote.
READ ALL UPDATES HERE: http://www.businessoffinance.com/insight/2016/6/20/the-ultimate-visual-guide-to-brexit
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