weekly technical review · 2020-06-16 · s&p 500 - daily june 16, 2020 3 global markets fell...
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Asset Classes – Performance per Year
June 16, 2020 2
2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
US Equities S&P 500 -4.2% 31.5% -4.4% 21.8% 12.0% 1.4% 13.7% 32.4% 16.0% 2.1% 15.1% 26.4% -37.0% 5.6%
Russell 2000 -14.4% 25.5% -11.0% 14.6% 21.3% -4.4% 4.9% 38.8% 16.4% -4.2% 26.8% 27.1% -33.8% -1.6%
NASDAQ 100 12.5% 39.5% 0.0% 33.0% 7.3% 9.8% 19.4% 36.9% 18.3% 3.6% 20.1% 54.6% -41.6% 19.2%
Global Equities MSCI World -6.9% 28.4% -8.2% 23.1% 8.2% -0.3% 5.6% 27.4% 16.6% -5.0% 12.4% 30.9% -40.3% 9.7%
MSCI ACWI -7.5% 27.3% -8.9% 24.7% 8.5% -1.8% 4.8% 23.5% 16.8% -6.8% 13.3% 35.5% -41.8% 12.3%
EuroStoxx 50 -12.9% 29.4% -11.3% 9.9% 4.8% 7.3% 4.9% 22.7% 19.6% -13.1% -1.8% 27.0% -41.8% 10.4%
Stoxx 600 -11.8% 27.9% -10.3% 11.2% 2.4% 10.1% 7.8% 21.4% 18.9% -8.0% 12.3% 33.4% -43.4% 2.9%
FTSE 100 -16.1% 17.2% -8.8% 12.0% 19.2% -1.4% 0.7% 18.7% 10.0% -2.1% 12.7% 27.4% -28.3% 7.4%
SMI -2.5% 30.2% -7.0% 17.9% -3.4% 1.1% 12.9% 23.9% 19.1% -4.6% 1.2% 22.1% -33.0% -1.4%
Topix -6.3% 18.1% -16.0% 22.2% 0.3% 12.1% 10.3% 54.4% 20.9% -17.0% 1.0% 7.6% -40.6% -11.0%
Emergings HSCEI -10.3% 14.5% -10.0% 29.6% 1.4% -16.9% 15.5% -1.4% 19.7% -19.6% 1.7% 66.0% -49.9% 58.8%
Bovespa -20.1% 31.6% 15.0% 26.9% 38.9% -13.3% -2.9% -15.5% 7.4% -18.1% 1.0% 82.7% -41.2% 43.6%
MSCI Emerging Markets -12.5% 18.8% -14.3% 37.8% 11.7% -14.6% -2.0% -2.3% 18.6% -18.2% 19.2% 78.9% -53.2% 39.7%
Bonds Euro Aggregate Bond Index 0.6% 6.0% 0.4% 0.7% 3.3% 1.0% 11.1% 2.2% 11.2% 3.2% 2.2% 6.9% 6.2% 1.4%
Euro 1-3Y Bond Index -0.4% 0.4% -0.2% -0.1% 0.6% 0.6% 1.8% 2.0% 5.0% 2.3% 1.7% 5.8% 5.8% 3.6%
US Aggregate Bond Index 5.7% 8.7% 0.0% 3.5% 2.6% 0.5% 6.0% -2.0% 4.2% 7.8% 6.5% 5.9% 5.2% 7.0%
US 1-3Y Bond Index 2.6% 4.0% 1.6% 0.9% 1.3% 0.7% 0.8% 0.6% 1.3% 1.7% 2.6% 5.0% 4.6% 6.7%
US High Yield -3.1% 14.3% -2.1% 7.5% 17.1% -4.5% 2.5% 7.4% 15.8% 5.0% 15.1% 58.2% -26.2% 1.9%
Commodities CRB Index -27.5% 9.4% -12.4% 0.7% 9.3% -23.4% -17.9% -5.0% -3.4% -8.3% 17.4% 23.5% -36.0% 16.7%
Gold 13.8% 18.3% -1.6% 13.5% 8.1% -10.4% -1.4% -28.3% 7.1% 10.1% 29.6% 24.4% 5.8% 30.9%
WTI Crude Oil -39.2% 34.5% -24.8% 12.5% 45.0% -30.5% -45.9% 7.2% -7.1% 8.2% 15.1% 77.9% -53.5% 57.2%
Dollar Index 0.2% 0.2% 4.4% -9.9% 3.6% 9.3% 12.8% 0.3% -0.5% 1.5% 1.5% -4.2% 6.0% -8.3%
Hedge Funds HFRX Hedge Fund Index -1.9% 8.6% -6.7% 6.0% 2.5% -3.6% -0.6% 6.7% 3.5% -8.9% 5.2% 13.4% -23.3% 4.2%
S&P 500 - Daily
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Global markets fell last week amid fears of a second wave of coronavirus and warnings from Central Bankersregarding the pace of the rebound of the economy. In that context, previous retracement targets can be used asnew supports. The S&P 500 rebounded on its intermediate first support at 2’930 following some fresh US fiscaland monetary stimuli. It is now retesting its resistance level at 3’110 and we remain cautious as long as theNasdaq has not retraced further.
Nasdaq - Daily
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The Nasdaq has been the market leader in both the correction and the rebound. It attempted a correctionbelow its support line before rebounding, but remains at risk amid high valuations, weakening fundamentals,and the persistence of volatility on markets.
Investors are already long Equities
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The latest JP Morgan survey shows that US asset managers have drastically increased their exposure toequities on recovery hopes, and since lows bond yields and credit spread offer little alternative to stocks.
Retail investors are also exceptionally active on the US markets (see next page) and contributed to the buyingpressure on equities.
RobinHood and the Equity Market
Robinhood is a US online trading platform. It was the first
platform to offer zero-commission trading which disrupted the
industry, put pressure on equity trading fees, and led to a
wave of consolidation among existing platforms.
The rapid expansion of the US monetary base, the drop of
trading fees, the confinement and the interruption of sports
events triggered a boom in retail trading activity in the recent
months, similar to what happened in 1999-2000 during the so
called “internet bubble”.
Uneducated traders are rushing to buy “hot stocks” with no
regards to valuation or any potential risk which led to some
“bizarre” trading activity on some stocks (Nikola, Hertz,
Carnival, United Airlines, Virgin Galactic, Zoom, etc…) . Many
traders are also actively using social media to promote stock
ideas and push up prices of the stocks they already own.
The number of open contracts on speculative call options has
also jumped sharply as well as the number of traded share on
the Nasdaq.
Robinhood gives access to the trading activity on its platform
which is also available on the Robintrack website. The next
page shows a few graphs to illustrate the frenzy on some
speculative stocks.
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Nasdaq trading volume (in number of shares)
RobinHood trading activity
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Nikola
Hertz Tesla
United Airlines
Stock price in pink, users holding in green. Source Robinhood
Retracement Targets
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Technical analysis offers a guide to trade markets and helps us stay disciplined and remove emotions frominvestment decisions.
We use Fibonacci retracements to give targets for the rebound within the broader correction pattern. One ofthe properties of those strange Fibonacci numbers is that they are are “fractal like” and that previous targetlevels within the rebound can be used as new supports when the rebound loses steam.
The table the rebound targets that been reached in the past weeks (ticked boxes) and the current position ofthe futures (grey dot).
Reference prices for front month Futures Contracts
Last
S&P 500 3'097 2'641 -14.7% 2'760 -10.9% 2'930 -5.4% 3'100 0.1%
Nasdaq 9'885 7'905 -20.0% 8'240 -16.6% 8'603 -13.0% 9'040 -8.6%
EuroStoxx 50 3'212 2'759 -14.1% 2'970 -7.5% 3'100 -3.5% 3'400 5.9%
Nikkei 22'430 19'500 -13.1% 20'200 -9.9% 21'100 -5.9% 21'700 -3.3%
HSCEI 9'814 9'500 -3.2% 9'900 0.9% 10'270 4.6% 10'700 9.0%
Target 1 - 38.2% Target 2 - 50% Target 3 - 61.8% Overshooting Target - 76.4%
Last week’s correction has been widespread among sectors
but value stocks.
Banks in particular have been hit the hardest amid growth
fears and higher bond yields.
The Russell 2000 has underperformed as well, confirming that
the “laggards rally” is fading.
Global Equities – US
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US Banks - Daily
US Healthcare - Daily
Russell 2000 - Daily
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%1
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31
41
51
61
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Days Since Peak
2008 Financial Crisis 1929 Crash Current Crisis
The S&P Correction in perspective
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The longer term picture is more uncertain and previous crises are a guide for what may happen if the situationworsens.
Global Equities - Europe
The EuroStoxx has rebounded on our first correction target
(3’100) but we expect more volatility and potentially more
downside.
Once again Eurozone Banks have been the weakest segment
of the market amid growth fears and falling bond yields.
Cyclical stocks have been weak as well and have led the
move down.
June 16, 2020 11
DAX - Daily
EuroStoxx Future – Daily
EuroStoxx Banks – Daily
2000
2200
2400
2600
2800
3000
3200
3400
-5
-4
-3
-2
-1
0
1
2
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
No
v-1
8
Dec
-18
Jan
-19
Feb
-19
Mar
-19
Ap
r-1
9
May
-19
Jun
-19
Jul-
19
Au
g-1
9
Sep
-19
Oct
-19
No
v-1
9
Dec
-19
Jan
-20
Feb
-20
Mar
-20
Ap
r-2
0
May
-20
Jun
-20
Risk Appetite Index S&P 500
Risk Appetite
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Our own Risk Appetite Index is reversing but remains in risk tolerance territory meaning that there could bemore selling pressure in the coming days/weeks.
Global Equities - Asia
Japanese stocks rebounded above their 22’000 support after
the BOJ boosted its monetary support. .
Chinese stocks remain rangy though US Listed ADRs and
also benefit from increase retail trading activity.
June 16, 2020 13
S&P China - Daily
Nikkei– Daily
HSCEI – Daily
Rates
Global Bond markets rebounded amid a drop in risk appetite.
Bond yields are close to their support line and could
breakdown if risk aversion increases. That and a rise in the
Central Bank’s pace of purchase could lead to an unexpected
rally of bonds.
Credit spreads remain too tight as Central Banks activity seem
to eliminate the cost of risk. Spreads remain too low and do
not offer protection against a likely rise in default rates.
June 16, 2020 14
German Bund Future - Daily
US 10Yr Yield - Daily US T-Note - Daily
Credit Spreads
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US – Corporate Average US - High Yield
Europe – Itraxx Main Europe – Itraxx Xover
Fixed Income Allocator - Weathering a BEAR market
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The Fixed Income Allocator proves to be extremely resilient in the current volatileenvironment when most competitors suffer from rising credit spreads, liquidityissues, and even from the extreme volatility on treasury bonds.
The FIA offers a perfect risk/correlation profile to diversify portfolios.
Currencies
The Dollar rebounded following the Fed and ECB meetings
before giving back its gain on US fiscal and monetary stimulus
hopes.
The Euro remains strong but investors have already turned
long EUR/USD and the pair is overbought, we continue to
believe that odds are on the downside.
We recommend maintaining a long Dollar bias and buying on
weakness. The very long-term picture (since the 80s) shows
there is a lot of room for the Dollar to appreciate.
June 16, 2020 17
Dollar Index - Daily
GBP/USD – Daily EUR/USD –
Daily
Currencies
In a risk-off environment, the Yen and the Swiss Franc will
benefit from their safe haven status. The two currencies have
held their long term resistance and are technically strong.
Keep long positions on those Yen and the Swiss Franc versus
the Dollar and the Euro as a macro hedge.
The Swiss Franc rebounded sharply last week especially
against the Euro which was overbought and close to a major
resistance.
June 16, 2020 18
USD/JPY - Daily
USD/CHF – DailyEUR/CHF-
Daily
Commodities - Highlights
Gold remains in its lateral consolidation range as it exhibits a
positive correlation with risky assets over the short term like in
February.
We expect Gold to ultimately rebound and retest the 2011
highs at about 1’950.
Silver is showing some weakness, but is supported by its
200D Ma at $17.7.
June 16, 2020 19
Gold Future – Daily
Gold – Monthly Silver Future - Daily
Gold Miners
June 16, 2020 20
The Gold Miners index is potentially making a major breakout with a support below the current level. -> Buildlong positions on quality Gold Miners.
Crude Oil
The WTI Crude Oil retreated along with risky asset after
closing the gap left open in March.
Energy stocks retreated as well, especially the weakest and
most leveraged companies in the Exploration & Production
and Services sub-sectors.
Stay neutral on Crude Oil and stay long Energy stocks with a
focus on the best quality stocks of the sector.
June 16, 2020 21
WTI Crude Oil - Daily
WTI Crude Oil - Front month vs Back month (in red) - Daily US Energy - Daily
Bitcoin
June 16, 2020 22
The Bitcoin is showing some strong correlation with equities and has failed to breakout. -> Stay tuned
Contacts
June 16, 2020 23
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