SaaSpocalypse NOW. Also, massive earnings and central bank week ahead.

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Today’s Links

The FX Trader piece from yours truly today - assessing USD status, interesting CHF techs, five central bank meetings next week, current trend readings, and more.

Before you get into algorithmic trading, realize what you are up against!
A WSJ article covers the privately held XTK operation, which is operating a super-computer running 25,000 Nvidia chips, trading USD 250 billion in assets daily, making a mint for its now multi-billionaire founder. And they are now doubling down and building an even larger setup. Some interesting tidbits in this article, as XTK is not a high-frequency trading outfit, something founder Alex Gerko disparages. Rather, the company employs deep learning to predict price movements on multiple time frames.

Chokepoints - a way to understand Economic Wars, including the Iran War, the USD system, rare earth minerals and even historical wars. Based on a recommendation from a good friend - I have started listening to the audio book of Chokepoints by Edward Fishman. There is also a Foreign Affairs article on “economic wars” by the same author.

What horrible forward risks are already baked even if Hormuz Strait fully opens tomorrow?
I already restacked this link, but mentioning it once again here: I sincerely hope he is wrong about the scale of the risk, but it is worth considering: Craig Tindale raises the alarm flag on the risks of a “polycrisis” if the fertilizer and pesticide disruptions from the war in Iran propagate through our global food production infrastructure, especially at a time when a super El Niño may be building this summer that could bring challenging weather patterns for many food crop growing areas.

Robert Pape’s latest on Iran War and whether the US optimism on the potential for regime change was always misplaced.
It is behind a paywall, but it is so critical to understand whether Iran’s regime can maintain the ability to disrupt in this conflict or if Pape, even if he is extraordinarily well researched and experienced, is a mere Cassandra. This certainly rhymes with the Chokepoints book above - at least in terms of Iran’s ability to possibly hang on to power and come back another day even if it proves incapable of maintaining Hormuz Strait disruptions for much longer (we hope).

Chart of the Day - The broken Dow Transports index

I forgot to mention this in today’s Saxo Market Call podcast: the wonderful Dow Transports Index, one that has often proven an excellent indicator when one looks at any significant divergences in its performance relative to the broader market as a leading indicator - one element of the legendary Dow Theory - is broken. The enormous pump and dump was driven by the insane short squeeze on index component Avis, the car and truck rental company with a market cap of just a few billion dollars a month ago. For whatever reason, the stock came under attack with heavy buying and likely call option buying as well from unknown operators. For a well organized short squeeze effort, it was an “obvious” target as more than half of the floating shares were sold short by short sellers. Before this squeeze, Avis was actually a negative drag in recent months on the overall Transport’s price-weighted 20-component calculation. In any case, starting in late March, but chiefly in April, Avis shares ramped from near 100 dollars a share on March 20 to as high as 847 dollars a share intraday on Wednesday. They closed that same day at 444 dollars a share and fell by almost half again on Thursday to 229 dollars a share.

What now? For at least a while now, until either the Avis component is dropped and replaced or its behaviour reverts to something resembling an accurate reflection of the outlook for the company’s growth prospects, it will take some time to trust the index again. We can, of course, develop new proprietary indicators that calculate the index performance sans Avis, but it’s a shame to see this storied index warped by this single name, reflecting how crazy pockets of this market have become.