The Q - Daily Edition
Operation Epic Folly?
"Nothing good happens below the 200-day moving average"
— Paul Tudor Jones
As they say, the first victim of a war is the the truth, and this is of course even more true if modern-day propaganda is magnified by the reach of social media. In this context, it continues to be extremely difficult to separate the noise from signal, let alone actually interpreting the signals themselves …
Hence, it seems yesterday investors’ mantra started changing from FOMO to “When in doubt, sell!”, as risk-off behaviour is becoming increasingly visible.
A quick run-down here, starting with what markets (and apparently Trump, probably under Bessent’s instructions advice) most look at currently, which is the US 10-year Treasury yield:
I have not yet had the time to do the exact work, but it must be a certain ROC (Rate of Change) in the 10-year yield over a short-time frame that has the White House getting nervous and going full TACO. Like yesterday, wen TACO-in-Chief Trump extended the negotiations deadline by another 10 days.
So far, it hasn’t helped a lot, as we can see on the chart above, with the last candle (today) continuing to rise.
Equity markets also took only very short comfort from the expansion of the deadline yesterday:
Also, on the daily chart, the S&P (and other indices) has spent enough time now below the 200-day MA to confirm that market dynamic has changed:
I invite you to scroll back up and read that quote of the day again…
European stocks may be joining in on that party as soon as today:
We expressed our concerns over the Indian equity market yesterday (which was closed on Thursday), as the frequency of news regarding panic fuel buying at the pumps has been increasing. This morning we got confirmation that those concerns are justified, with the BSE500 down 1.6%:
The Dollar is rallying again this morning, but as mentioned yesterday, putting it in perspective, we would have expected for the Greenback to be MUCH stronger at this stage:
And this is probably the best sign of the structural, secular weakness behind the USD.
We also need to mention the European bond market, below proxied via German Bund Futures, which is facing an epic sell-off as yields are heading towards 3.10% this morning:
Finally, oil is NOT indicating that a permanent ceasefire is laying just ahead of us:
Three-for-one offer today … in COTDs that is.
The first one is in reference to me insisting on starting today’s letter with the bond market instead of the stock market, where for sure, according to your view at least, all the action is happening. Yes, but no. The stock market is seeing action, but it is the tail waged by the bond dog. Consider the chart below - the grey line is the steepness of the yield curve (10y-2y) which is deflating like a beach ball at the end of the summer. The red line is the stock market, happily following the shapc of the YC lower:
The other two charts are two attempts to quantify Trump’s TACO moments. The first is by Vanda:
And the second by BCA:
Nothing specific to watch today, other than all the market price movements across the asset classes for hints what may be coming.
Be safe out there and May the Trend be with You!
André
Everything in this document is for educational purposes only (FEPO)
Nothing in this document should be considered investment advice
Investing real money can be costly; don’t do stupid shit
Leave politics at the door—markets don’t care.
Past performance is hopefully no indication of future performance
The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG