Macro Dragon: The Technicals Are The Technicals...
Global Macro Strategist
Summary: Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
Macro Dragon: The Technicals are the Technicals...
Folks as a pin going forward during this turbulent times, let us please remember:
The Covid-19 crisis with all its challenges, stress, chaos & opportunities will also eventually pass. What defines humanity & ourselves as individuals is how we both individually & collectively act under adversity. Think of how you want to look back over this period, doing your part to keep your family healthy, society healthy & functioning. Keeping a cool head, when others are losing theirs, maintaining an objective list of positive aspects & negative aspects of the policy responses & economic shock the world is / could go through. And lastly gratitude, sympathy & empathy for one another. Parts of Asia got / are getting through this & so too shall the RoW.
The one big positive from all this, is it reminds us we are all One. Plus we are not at the top of the food chain. Covid-19 does not care if you are rich, poor, what your ethnicity & skin color are, what passport/s you hold, nor what you age or profession is. Our greatest achievements are almost always those that we collectively do with others & sometimes as in this case, potentially as species.
Lastly keep your mind open to growth & opportunities.
Top of Mind…
- So whilst S&P c500 closed down -1% overnight to 2762, its worth noting the VIX continues its downward grind at -1.2%. We are now c. -55% from the 89 highs.
- Say what you what about the pricing of economic fall-out in the US (as KVP has been yapping on about), potential 2nd & 3rd waves, the negative earnings we are going to get & the focus on guidance… the price action is the price action. And if 90% of you walked in today with no history of the Covid-19 or any news flow & just looked at the charts, you find a few things standing out – US Equities look super bullish, Gold looks phenomenally bullish, Oil is looking bearish & likely to retest the 19.27 lows from 30 of Mar.
- Just a side note on Gold -KVP expects us to see $2K easily before year end & one the latest mantra on the multitude of VIP calls is KVP feels you cannot own enough gold, this is not for a +3% or +5% pop… this is for a structural multi-year breakout that only comes once a cycle… whether its outright, calls or call-spreads (that you roll-up) or both. Point here - & this is another Dragon Principle (will do a series on these at some point), its all about position sizing. KVP is neither a bear nor a bull… but he can be one hell of a piglet! (& just ask the local Paella joint! Shout-out to Don Quijote Restaurant in Singapore, where you can still get deliveries)
- Oh & big horn honking, on the break-out higher on Gold Sport, as we took out the 1703 recent highs & are now sitting comfortably above that at 1722. Next key lvls are around the 1800 mark & the 2011 high of 1921. We are gonna have some massive big up days on gold, don’t believe a lot of people are in on this nor can participate yet – we are still well of record highs in Net Long positioning based on the last CoT Report (65% of the 52 Wk High, i.e. 189K vs. 292k… & KVP believes we’ll blow through the latter to ATHs on net long positioning). Those who may have missed the move, or taken profits to early - could thinking of potentially having last wk lows as stop, or an even much tighter stop south of 1700.
- Whilst the convexity is no where near the situation surrounding the now legendary words of George Soros, but now & then you have to “go for the jugular”. As another side note, KVP personally feels that at least in rgds to public performance disclosure & running ‘proper’ money (few yards), Stan is hands down the best out there that ever lived (if you have alternatives, pls ping across with evidence… ) more importantly, he just seems to be a spectacular grounded human being – those few, rare, full package beings. This interview from a few years back, is priceless for anyone that’s looking to up their craft in Global Macro
- Anyhow, still remember him saying, that Soros would trade off of Stan’s own ideas, spending literally a minute fraction of the time in the office & still make way more money than him. Why? Position sizing… Sizing is everything… in the Dragon’s framework… remember our Anthem thought Jan & Feb that one cannot own enough US Duration… well another verse has been added to that anthem
- Going back to overnight, two other things stood out – continued USD weakness & nice to see that DollarYen pullback (Spoken to a few of you on this… KVP is not of the view that USDJPY spikes up post the huge 20% Fiscal Move, nor on any future MP… we see 100 before we see 115, from these c. 107 – 109 lvls imho)
- The other one was the -1.54% on WTI to 22.83, KVP is going to do a special on oil shortly – hopefully out tmr – he continues to think, there is so much smoke & mirrors, that any cuts are literally worthless when the global economy is still in freefall. We are almost certain to break the 19.47 low.
- Yes we pulled back c. -20% last wk, but that was post the +32% wk that was on Trump tweets suggesting that SA & RU are gonna cut production by 1/2 to 2/3, and the point people are missing – is it all does not matter, now. It will at some point, but for now… the world is drowning in oil & the global economy is sinking through the bottom of the ocean
We could continue to be in a gang buster period of volatility both to the up & down side until at least mid-Apr to back-end of May. Some, time decay is needed in the system, both from a Covid-19 spread (past peak velocity upwards), even bigger & even better government / fiscal / monetary policy response, to overall heads of governments giving this the 2nd & 3rd order consequences thinking that it needs. This to shall pass. Keep you minds & hearts open.
Key thing that KVP is trying to figure out is, how much of the economic fall-out & massive unemployment is correctly priced in – seems ludicrous to run on a V-shaped economic recovery across all sectors.
Good luck to everyone out there, be nimble & position accordingly.