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Macro Digest: Fear is replaced by 'Nervous stability'

Steen Jakobsen

Chief Investment Officer

Summary:  Last 24 hours we have seen positive signs of stability and liquidity coming back to the market. We still need COVID19 cases to peak to find solid grounds, but for now storm is ebbing.

What has happened?

In the last 36 hours we have seen more policy changes than in my full career of >30 year as trader!

  • Germany embraced EU Issuance (Netherland still object it seems)
  • FED did yield-curve-control by proxy - meaning FED will control ceiling on rates (ECB et al. will follow when we get into more "smooth sailing...")
  • Helicopter money is rumor left-right-and-center in the expected Congress bill due any minute

What did market do?

  • Asia +8%
  • US Market single biggest move....EVER! @time of a writing DOW is up 2.000 points, S&P +7.5%, DAX +10%
  • Credit spreads coming in for 1st time this cycle - one of the major signs we have been awaiting
  • Silver + Gold rallied - indicating "reflation" / inflation / stimulus coming through (in 2008/09 Gold + Silver rose >50% when low was in...)

But... this is far from over but we today left the FEAR part of this bear market. It remains a bear market. Think of this as an Elliot Wave Structure - We may just have completed the Wave 3 down, now comes 4th up move, before final 5th wave down (I call this the recession / depression) move in Q3 into Q4...

FED and global government has committed grant/Helicopter money to stop the bleeding. How we trade from here depends on how we navigate the difficult path of securing social order, fabric and ultimately "fairness". Illusive terms, but if the money does not reach people who really needs them, then the next crisis will be bigger and more violent. However if we secure social order/base and institute proper price discovery and business cycle post this cycle in 2021 then we have a chance. (My main scenario)
For now though... 'Fear' is replaced by 'nervous stability' but it’s based on CONGRESS DOING DEAL NEXT 24 hours

Now we look into month end to get a feeling for redemption in funds, the overall liquidity and the end of Japanese Fiscal Year.

Analog chart on prior crisis

Source: Jesper Christiansen, MRTI Trading
Move of High and off Low 
Source: Jesper Christiansen, MRTI Trading

Credit Monitor from Saxo Trader

CDX Spread – FIRST DOWN day in this cycle…

Source: Bloomberg


Source: Bloomberg

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