State of The Markets | Dollar Under Pressure Amid Santa Rally


Dollar under pressure amid Santa rally. St. Nick kicked US stocks higher on Thursday, sending S&P 500 near record high as the Dollar was sold amid improved risk sentiments. Dow (+0.55%), Nasdaq (+0.85%), S&P (+0.62%) and Russell (+0.89%) all closed in green with consumer discretionary, communication services and industrial leading the gains while energy, utilities and real estate lagged. Dollar (DXY) rebound was suppressed under the 96 handle as yields climbed further. The 10Y benchmark pierced 150 basis points as London closed.

In the commodities market, crude advanced further to $73.80/bl as Baker Hughes showed more rigs are operational signaling improved demand. Gold climbed past $1,810/oz as bidders continue to see the metal higher amid inflation. Elsewhere, iron ore dropped to $112.55/tn after news hit the wires that BBB might not pass the US senate.

In the FX space, mixed sentiments can be seen in the short and medium term accounts as Swiss advanced towards demand territories while Kiwi eased. Medium term traders sent Sterling to the helm of demand in light of BoE recent hawkishness. Long term Euro sentiments finally turned bullish against the Dollar while the rest remained unchanged. The US equities market is closed Friday for Christmas Eve.

OUR PICK – No New Picks

No new pick going into the weekend. After continuous 16 weeks of US equities outflow, finally this week marked an inflow of around $10.8 billion, together with $27 billion flowing into the short term money markets instruments. Reports from Bank of America showed that the equities inflows were very much retail while smart money moved into the safety of bonds and money markets. Underlying breadth still shows top heavy market despite recent rally, signaling short covering and profit taking ahead of the new year.

Ho Ho Ho. Happy Holidays folks!

Trades updates:

Equities: Currently we are holding 8 stocks – 7 longs and 1 short. We are long AUY (21% undervalued) with dividends yielding 2.91%, T (16% undervalued) at 8.36% yields and COG (CTRA) (16% undervalued) yielding 2.58%. CLVS is currently 21% overvalued with -7.19 z-score but Tudor Investment had stepped in recently and we decided to hold. We remain bullish with VIPS (47% undervalued with 5.59 z-score), GT (39% undervalued with 1.28 z-score) and CRON (12% undervalued with 9.18 z-score) while bearish GE (13% overvalued with 1.43 z-score).

FX & Commodities: AUD/USD has reached medium-term TP1 after re-entry, GBP/JPY re-entry has reached all targets, and Crude buy limit remains active.

Risk Disclaimer:

This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities/oz. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.