STATE OF THE MARKETS
Stocks rout as investors cashed out. US stocks plummeted on Thursday, erasing Wednesday’s relief rally, after long term (LT) investors continued to sell on the rip; cashing out their long term holdings amid fear of a coming US recession. Nasdaq (-4.99%) was the worst hit, followed by Russell (-4.04%), S&P (-3.56%) and Dow (-3.12%).
Bonds lost bids, sending yields higher across the board, with the inversions between 7Y (3.06%) and 10Y (3.03%) remains. Demand for cash was high, sending the Dollar index back above 103.50 minor handle as long term investors cashed out.
In the commodities market, crude continued to climb as high as $110.30/bl before settling around $107.55/bl, as the European Union geared up to replace Russian oil by the end of the year. Fear of recession sent gold to as high as $1,909.65/oz before settling around $1,876.90/oz as bidders stepped in. Elsewhere, iron ore continues to drag lower as investors’ worries on demand growth return. The commodity settled around $142.90/tn as New York closed.
In the FX space, King Dollar reign continues in the medium and long term accounts alongside Loonie, Aussie and Euro. Short term traders were seen quick in bidding Aussie and Euro on the pullback. Overall sentiments turned more bearish as Yen advanced further in the demand territories, while Swiss has outpaced Yen in the long term accounts.
On Friday, markets continue to weigh the war in Ukraine while looking forward to seeing earning reports from Goodyear Tire (GT), Cigna (CI), DraftKings (DKNG), Under Armour (UA), Arbor Realty (ABR) and Century Casino (CNTY) as well as the very much awaited NFP reports.
OUR PICK – No New Pick
No new pick going into the weekend. Money flow trend of late is outflow of equity, outflow of bonds and inflow to short term money markets. This week another $2 billion drain of equity, $7.5b out of taxable bonds and close to $1b going into short term money markets. It seems that investors are reluctant to commit for the long term as fear of recession remains. Plenty of cash are sitting around waiting for the right time to be deployed.
Trades updates:
Equities: AUY (19% undervalued, 2.21% yields) is on wave 4 pullback and we expect to meet the final target in the coming weeks. We remain bullish CTRA (COG) (20% undervalued, 1.88% yields) and maintained target at $35.30, we believe T (20% undervalued, 5.56% yields) has found a bottom and looking to close the gap, VIPS (37% undervalued with 4.78 z-score) remained well bid after UBS maintain neutral rating but reduced target by 10 cents, CRON (21% undervalued with 27.69 z-score), WBA (28% undervalued, 4.36% yields) had pulled back further to $42 and we remained bullish, and M (44% undervalued, 2.64% yields).
FX & Commodities: Silver may have found a bottom, Crude has reached short term TP2 and stop updated to $99/bl with new targets,
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.