Wednesday Global Edge Update

Once again we start with the catalysts and we have a number of growing concerns which can have a knock on effect…as Fotis puts it..just like dominoes. They include Chinese traiff management and Turkish economic collapse.

The advise is to focus on the economy, the facts show that the US data is supported by cheap money… credit conditions hold the key. Debt is the issue, corporate government and consumer…all building as percentages of GDP. This is against a background of mediocre growth…it is not strong.

Beware of the economic cycle so be prepared for a change in the second half of 2019 as we expect the inversion of the yield curve by December.

Fotis takes you through the details and evidence of a cycle change..a peak which we are witnessing now. It is essential to prepare for the big picture even when tactically you are taking advantage of current circumstances.

 

Basics: sell China, sell emerging sectors, sell transport, buy safe havens

CHAD: inverse ETF Chinese equities. Keeping it in the portfolio

XLK: Technology ETF

IYT: transport: down

ITB: home construction. Broken the trendline down.

FXI: China shares.

Short term equities are moving higher..these are tactical trades. But to position for the longer term, we have to prepare for a shift.

US30: DOW

This could move higher, wait for a pattern to fade. On the weekly, we see t is one standard deviation and has the potential for a spike higher.

DAX

Going nowhere. Looking to sell when it breaks.

Consumers and corporations will suffer.

Forex

EURUSD

Finding a base and moving up. Pay attention and wait

USDCNH

Every time tariffs are threatened the Chinese devalue to make their economy more competitive. It is choppy. Wath this it can’t continue and is artificial.

USDCAD

Directly affected by crude,

USDJPY

We have been selling spikes and short-term longs from particular areas.

The BOJ is considering new policy so watch out for shifts as QQE did not work and they are allowing higher yields.

We are in the middle of the balance, we need to move below 110.60. Either sell this into resistance 112.50 or wait for the break 110.60 with collapsing equities.

EURUSD

On market profile, we have a big range above and now close to the value area low. Watch to see if we have a mature balance where it is and wait for a break of 1.1630. If we clear the point of control

EURJPY:

Showed signs of weakness, We could have spikes to the upside in equities, so wait for a bigger balance and if we clear 128.40s we will look to sell.

EURGBP

Brexit reports are pushing this higher.

GBPUSD

standard deviation is at 2 now and we are approaching interesting levels. Watch this.

Milk auctions were good:

NZDUSD

Now very mature: so look at the balance fr a move above ). 6760, 0.6687.

5YR US

Ths is on the watchlist as well for a buy. Expecting a lower yield.

 

 

One final word: The VIX, produced a big win last time and can be bought out of the money…so not too far! 12/13 is an appropriate strike price. We are close to the February levels again.

Judith Waker