Retail investors on the wrong side of the trade

There was little chance that the AAII Survey respondents would have turned bullish following the market declines seen over the past week.

My take on this contrarian indicator suggests higher stock prices, thus I added to positions the past few days.

See next post…..

September 25, 2020
by Rob Zdravevski
rob@karriasset.com.au

We’re only renting Gold

But to be clear about today’s gold post, it is only a “trade”, that’s why I placed that reference, “it’s something to rent rather than own”.

I still think Gold still remains a marginal trade in the larger context as mentioned in these two previous posts.

Mean reversion and extremes above 200 day moving averages warrant attention.

https://lnkd.in/gK9hj-P

https://lnkd.in/gj3fJF8

September 25, 2020
by Rob Zdravevski
rob@karriasset.com.au

The current Gold trade

Gold needs to hold US$1,843….
if it doesn’t, US$1,795 is the next stop.

For now, probability of Gold staying above US$1,850 is increasing;
the AUDUSD is holding 0.7000,
and AUDJPY and Silver registered oversold readings overnight,
while Bitcoin is holding $10,100

On a daily basis, Gold and Silver moved 3 standard deviations below their mean, which coincides with the aforementioned oversold readings.

So, “long” Gold (or a proxy Gold equity) at the current US$1,863 (cash market) is to be treated as a “trade” pending supports being broken.

In other words, it’s something to rent rather than own.

n.b. if Gold trades to $1,795 the AUDUSD should then be around 0.6835.

September 25, 2020
by Rob Zdravevski
rob@karriasset.com.au

A consolidating ASX 200

A reminder that the ASX 200 has traded in a “sideways parallel channel” since May 27, 2020.

That’s 4 months !

Buying the dip

I don’t think equity indices will register oversold RSI readings in this current retracement.

Stocks, currencies and commodities have all had a nice mean reversion, some of the latter “went” oversold BUT “stuff” hasn’t crossed over nor match or have done the things they are supposed to, to tell me that we have deeper to fall.

Thus, I have been adding to positions, initiated some new holdings……it’s not all-in, but I have deployed some capital earlier this week….

today, it’s a bit “safer” than 3 days ago to buy some securities.

As always, do your research or seek advice.

September 25, 2020
by Rob Zdravevski
rob@karriasset.com.au

Gaps have been “backed and filled”

Equity Index targets mentioned in last week’s newsletter have been reached.

Gold still holding $1,902
Watching the currencies closely.

An obscure indicator for directional moves in equities is Bitcoin. Let’s see if it holds the $10,100 region.

https://mailchi.mp/karriasset/market-quips-september-18-2020

September 22, 2020
by Rob Zdravevski
rob@karriasset.com.au

AUDJPY leads SPX moves

A little short-term macro correlation illustration

Below is a 5 minute chart of the AUDJPY versus the S&P 500 mini futures. <AUDJPY is in blue>

Beyond the correlation, note how the currency tends to lead the equity index.

I’ve placed a couple circles to show when a decline in the AUD against the Yen coincided with a fall in the S&P 500 futures.

September 22, 2020
by Rob Zdravevski
rob@karriasset.com.au

Passive ETF index hugging is “so last year”

It just seems like the age of the stockpicker and macro trader is upon us.

The challenge lays ahead for the passive ETF index hugger.

September 21, 2020
by Rob Zdravevski
rob@karriasset.com.au

Market Quips & Synopsis – Sept 18, 2020

Market Quips & Synopsis Some brief points about selected markets or assets and look for the links within for added musings.

About current markets, I’ll open up by saying..

I notice there is dangerous trading going on, market capitalisations in some companies are extraordinary.
For example, how does $1 billion market cap on revenues of $20,000 sound?

ASX scuttlebutt says, “shorts” are trying to pressure companies into raising capital, some are seeing increased stock “promotion” activity and there are many people in the market “that don’t know what they’re doing or shouldn’t be there”.

I see the AUD and XAU (Gold) in a holding pattern, (see the AUD chart below);
they need to hold 0.7240 and $1,902 respectively,
breaks above 0.7355 & $1,978 should see a new lurch higher

Also watching AUDJPY closely, need to hold 76.00 to confirm “more risk-off”,
A move above 0.7730 suggests “risk-on” and higher equity indices

Another indictor to assess the steam in a S&P 500 decline is whether Japanese 10 Year Bonds (JGB”s) trade below 0.00%.

The S&P 500 is down 6% from recent highs,
Indicators are not clear in calling a new downward trend, however I think 3,272 is the target (a further 2.5% lower).

The Nasdaq 100 has now fallen 11% since its September 2nd high.
Looking for it to ease a further 2.4% to 10,814 before determining the strength of the decline.
The decline wasn’t a surprise, as written by me on August 29 and September 3rd  

Global portfolios have a 3% short position in either (or both) the Nasdaq 100 or the SOX index

My ASX 200 target is 5,803, which is 1.2% below the price as I write.

I’m pleased with calling Oil down from $44 to $39.30. Brent held $39.30 for the past week, 
has since rallied 10% in past 4 days….quick rallies are not always a preferred scenario

VIX remains relatively high at a reading of 26, the call option phenomenon has influenced this increase

The De-Equitisation story combined with rising money supply & low interest rates leads to my thesis that higher equities is the dominant and over-arching long term theme.

While we accept near-term rates will stay Lower for a while,
I think the long end of interest rate curve will rise.

AAII Survey exhibiting narrowest bull/bear spread since June 11, which is when S&P 500 had a 8.2% decline.
Since March 5th, more retail investors have remained bearish (than bullish). This survey remains a reasonable contrarian indicator as markets bottommed on March 26th and never looked back.

Oil Rig count showing no meaningful change of increase, see attached, number of rigs in operation has halved

I remain long term bullish on the Oil price and continue to accumulate positions (proxies) to benefit from this opinion.
Incidentally, I have a view there is a coming crisis in energy prices which will stoke inflation (albeit it may be 18 months away) 

In another edition, I’ll expand on various investing themes and I hope to soon publish my bullish thinking about Platinum on my Linkedin page.

That’s all for now…

warm regards,
Rob

Quick Market Quips – Thursday Sept. 17th, 2020

Short term views include;

AUD/USD needs to hold 0.7240, otherwise it moves lower to 0.7140 or test 0.7067. (see chart below)

Coinciding, AUD/JPY needs to hold 76.05, this FX cross seems to leading risk-off sentiment in equities markets;

My ASX 200 target is 5,803;
S&P 500 direction not conclusive, thus…
Bias is to accumulate on weakness, although developing downtrends need to be monitored.

Gold short term downtrend, albeit not a strong trend,
needs to hold $1,902 support, other $1,825 region is next stop
(see chart below);

thus caution on Aussie gold stocks may increase;

Note, Brent rallied 6% in 2 days, as it held $39.30 (which remains important support);

Hope to summarise my Long Platinum view in coming days;

And I’m holding a 3% portfolio short index weight for global portfolios in U.S. listed SMH

September 17, 2020
by Rob Zdravevski
rob@karriasset.com.au

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