Current Affairs effect on the market

[peterma]

@peterma

will make for an interesting US session

That session coming to a close as too the week.

One thing that I’d like to draw attention to for guys learning the market - I’ve mentioned it many times - it’s the phenomenon known as the 50% fib - the half way mark.

In Fibonacci there is no such level as 50% yet in the market it holds true - why?

Because it’s simple - and in the market simplicity rules - don’t let the gurus tell you otherwise.

Anyways - end of week - keep it simple - see where price has come to a close:-

Apologies for the chart overload but maybe have a look at spx and it’s US session - and how to trade that.

[peterma]

End of week - not much to report in Current Affairs - or is there?

Eur/Gbp is a large slice of my thinking - well actually in FX terms it sums what i need to take on board.

As I’ve mentioned a few times in FX the CB rules - thus every nuance of their respective statements are seized upon by the algos - but as always there is also context.

And context is simple - just like the market.

Yesterday both the BoE and ECB announced their respective rate increases - both equal - yet the market reacted more positively to the ECB - could we have known in advance?

EG chart shows the context way easier than I could with a thousand words - the rising trendline was drawn on the 3rd hit in mid August:

See then yesterday’s reaction.

[peterma]

While since i posted - EG continued Northward since, reaching a high of 89.60 beginning of this month and has fallen back now to 88

Today the long awaited announcement of another post brexit agreement between EU and UK - will likely be positive for both currencies given that without such agreement more argument. legal action, extra trade restrictions etc etc was the alternative.

Here in NI business has access to the EU internal market unlike our colleagues in GB - my personal hope is that access will not be watered down.

One such access point is here - I’m personally watching this with some trepidation tbh.
Vies on-the-Web - European Commission (europa.eu)

[peterma]

@peterma

I’m personally watching this with some trepidation tbh.

Have read all 101 pages and have to say a good job has been done - congrats to both EU and UK.

GBP & EUR have continued to rise since yesterday morning when first the news broke that the deal was on.

[peterma]

The recent events regarding SVB had a huge impact on risk appetite over this past 2 days.- very visible on small caps indices and the bond market.

SVB were a bank that specialized in the start up sector of business particularly in the tech sector.

In the UK the BOE, Fin Min and Treasury have met this morning to agree a plan for affected business in the UK - that plan will have to be in action from tomorrow morning.

The danger in the US is the possibility of contagion - the Fed cannot sit on it’s hands remembering the Lehman fiasco - however it’s a 2 edged sword - do nothing and if the US banking sector gets into difficulty then inflation will drop.

Problem with this approach is that the Fed will have zero control over what would happen next - so likely they will take some action.

Difficult days ahead especially for deposit holders of more that $250k - insured holders below that number will start to get their money tomorrow morning - hopefully…

[ForexGump]

Regarding SVB, Janet Yellen was intereviewed today and said that the federal government would NOT bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money.

The simplest solution woulb be for SVB to get acquired by another bank. There were probably discussions over the weekend. Monday will definitely be interesting.

[peterma]

@ForexGump

The simplest solution woulb be for SVB to get acquired by another bank

Aye - good chance because it’s a viable business - seems took one larger investor to cause the dominoes to fall.

In the UK SVB has a relatively large presence in the start-up sector - estimated at around 50k jobs dependent.

I mentioned above that UK Govt & CB working over the weekend for a solution - seems they have found one based on your post - a consortium has made a bid to the Treasury tonight (SVB UK put into formal admin earlier today) for SVB (UK) Ltd.

The consortium is led by TBOL - chairman is one Harvey Schwartz.

There will likely be rival bids tomorrow from mid east among others - all good news.

Will Carlyle have an interest in SVB in US … I would if I were them

[THE_GOATE]

Is it safe to say that after a sudden move in the markets as just took place at the opening session right now the trading gap that was created will be closed or near close in the ensuing hours? I am watching gold and UJ.
Not sure if I’ve articulated the question clearly.

EditMarket performed just as I thought it would and closed the trade gap as last chart shows.

[samewise]

What are we thinking happens in the morning after more news reports hit about bank failures and “contagion”?

USD heading down, don’t you think?

[peterma]

HSBC have bought the UK arm of SVB - all monies safe, business as usual this morning.

Now to the US

[peterma]

Current affairs effect this morning is negative stocks positive bonds - risk off.

Reason is Credit Suisse - long story short is the headline “Credit Suisse Saudi baclers say no more money”.

What was actually said by Saudi National Bank’s chairman was
“I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries,”

In normal circumstance comments that would have little effect on the market but right now not normal times.

There needs to be more positive proactive approach - a market reacting to fear can lead to bad consequences.

[peterma]

@peterma

Current affairs effect this morning is negative stocks positive bonds - risk off.

Reason is Credit Suisse - long story short is the headline “Credit Suisse Saudi baclers say no more money”.

Further to yesterday evenings announcement from the Swiss Nat Bank to the effect that we will back you - Credit Suisse are to receive 50bn from the SNB.

What will they do with that 50bn?

Put it like this - I’d rather not be short that stock right now.

That’s a first step in positive/proactive action by a CB.

[peterma]

@peterma

That’s a first step in positive/proactive action by a CB.

Next step is to encourage a takeover by a profitable bank - that has been confirmed this evening - UBS are the new owners - 100bn made available by SNB for liquidity.

Shareholders have little say - new law to by-pass a vote likely already passed, if not then soon.

First offer was rejected by the board, 2nd offer is double and final - passed.

What about the closing price Friday which was SFR 1.85?

Deduct 1.30 - hindsight is a great teacher so wonder is there a lesson for the largest shareholder.

Anyways come tomorrow morning a certain amount of fear will have been lifted - legislature and business working together can be proactive and positive?

[peterma]

@peterma

Anyways come tomorrow morning a certain amount of fear will have been lifted -

OK the fear factor has been lifted somewhat, although still early days.

Tomorrow’s action by the Fed will obviously have a market effect.

It’s worth pointing out the correlation lately between the bond market and USD/JPY - that pair’s movement is being influenced by US bonds - which in turn reflect current risk movement.

2 daily charts - 1st is US10yr - the down arrow is the Dbl Top dated 2/2 - then a very pronounced triple top yesterday.

Then the USD/JPY daily covering the same t/f - today’s action thus far reflecting yesterday’s bond market.

Bottom line is that it’s worth keeping an eye on bond reaction tomorrow.

[peterma]

US bonds continued their price fall since above,

Fed will likely raise .25 today - if they do not then fair chance that the fear factor could return - the question in investors mind would be why no rise?

The changes likely will be in the fwd guidance and with what the Chairman has to say.

It’s an important day not only for the US - we wait.

[peterma]

@peterma

Bottom line is that it’s worth keeping an eye on bond reaction tomorrow

Stocks 1st spiked up and then have subsequently fallen - USD/JPY likewise reflecting the risk off mood since the FED.
The Bond market had no such volatility - price on the 10yr pretty much indicated where risk lay most of the day - hr1 chart:

@peterma

The changes likely will be in the fwd guidance and with what the Chairman has to say.

The chairman spoke of "Financial conditions that have tightened by more than the traditional indexes say"

It seems that Powell is saying that lending is tighter right now for business and financial indexes “don’t necessarily capture lending conditions”

Maybe he will have more to say in later days but right now he spooked the risk on guys.

[peterma]

Usually the 1st Friday has, or can have, a huge impact on FX - but right now that market is somewhat distracted on rates and inflation - FX is trying to second guess the Fed.

The stock market is a little different - it is looking for positives reflected in the upward daily since Oct 22.

Often the question is asked - is it possible to get an inside on the NFP before Friday - legally that is.

NFP is about business - that’s who do the employing - so if you ask the employers are you confident and they answer yes - then good chance they will employ more.

But who to ask - maybe the sales ppl, or the stock guys.

The thinking is about the future in business - the ppl engaged in that area are the Purchase Managers - they have to figure what’s up ahead and ensure that stock can meet sales demand.

S&P with it’s upward trajectory since Oct '22

[peterma]

Look closely at the above daily and then figure this - released earlier this week.

I hear guys say - ah but the US economy is made up of more than manufacturing - correct, so then look to the composite pmi

(For guys learning PMI is Purchase Managers Index) - regarded as a leading indicator - i.e. looking at the chart to the right)

United States Composite PMI - April 2023 Data - 2013-2022 Historical - May Forecast (tradingeconomics.com)

[peterma]

@peterma

The thinking is about the future in business - the ppl engaged in that area are the Purchase Managers - they have to figure what’s up ahead and ensure that stock can meet sales demand.

PMI is classified as a “leading indicator” - meaning that it indicates likely price direction.

2 weeks ago I highlighted the S&P chart at 4049,it’s trajectory, and then the PMI

Leading means to wait - check 4140.70 since then - guys went short hoping to reach back down to 4049 - price tried - went 50% but gave up and headed North.

The 50% level, though technically not a fib, is an important level to watch.

[peterma]

@peterma

PMI is classified as a “leading indicator” - meaning that it indicates likely price direction.

2 weeks ago I highlighted the S&P chart at 4049,it’s trajectory, and then the PMI

Leading means to wait - check 4140.70 since then

Price closed this week at 4211.40 - leading means to wait and waiting means to be patient.

What’s likely up ahead?

This is where current affairs effect the market most - when either optimism or pessimism prevail.

Which do you think this incoming week?