Overall on the market and the Fed:
Clearly the last week has been “Risk-on”! Both equity & bond funds saw record inflows for first time in 10 weeks as NO FED clearly coming into focus ( not our focus per se but the market’s” Without the Fed, Dollar can stay weak and inflows continue to junk, gold, EM assets & US cyclicals. Outflows will continue from defensives including healthcare and staples.
DXY
Keep an eye on DXY if the strong dollar trade is over then commodities will stop going down. 3Q earnings are not helping the USD right now…
Meanwhile DXY death cross of last week proved dead on! ….technically broken on this all out consensus long where the ways it was played was via EM and short commods… they were way oversold.
Speaking of weak DXY impact – China
- SHCOMP now 6.5% this week best show in 4months
- GDP out Monday evening and could be risk to upside for mkts – not downside. (mkt) Still too pessimistic on China/ Possible they officially show 6.8% for first time since ‘09
- BABA buying out rest of China’s YouTube YouKu – BABA on small tear! …YHOO is the way to play …LONG BOTH. Adding some YHOO
Consumer Confidence higher with the stock mkt – Fed anyone?? I believe higher oil and confidence and markets have more impact on the Fed than people think. I still think you need to protect your portfolio from a surprise Fed attack in last 2 meetings of the year.
Oil – Why I think the bottom is on…Listen to SLB results conference call
- SLB mentioned on their call that many E&Ps will initially dedicate any incremental cash flow generated by rising oil prices to mending weakened balance sheets – rather than adding rigs. ….this is not good for service stocks but great for EP names…This is why we may have seen a cycle top for US production that will not be hit anytime soon.
- Russia saying they won’t rule out price cut in advance of technical meeting next week but OPEC and Non OPEC… is market prepared for this meeting? I lean to the long side in this event