When no news is good news…
The market is likely to stay volatile but contained within recent ranges.
Record levels of cash sitting on the sidelines shows that investors are fearful and preferring safety until the markets become more stable and the economic situation and the US Federal Reserve’s hiking path become clearer.
Environments such as this often mean that without new bad news to drive the market lower, the market will tend to drift higher. Today the market will be focused on the US midterm elections, but the key data point of the week is the US inflation data on Thursday.
Till then, the market is likely to stay volatile but contained within recent ranges.
Trading Tip
Do the easy trade
For some reason, people, in general, often try to do the hardest things in markets i.e. they try to fight the market when it’s going against their views. The beauty of the market is that there’s a lot of different instruments to trade!
If the trade that you strongly believe in is getting hammered and you’re losing money repeatedly on it — take a step back and cut your losses.
Find something else to trade. Something that is moving in the direction that conforms to your view of the world and the market. The objective, as always, is to make money and not to be right.
You do not have to do it the hard way!
Day Ahead
US Midterm elections are ongoing; expect volatility in the US markets should results pivot towards the Republicans.
Trading Plan
1. Currencies:
EUR - Short the EUR. Stay patient while the EUR continues to grind higher. Stay short.
2. Commodities:
Uranium & Energy - Stay invested.
3. Stocks:
US Stock Index: No news day but stocks did well as the energy sector led the way higher.
Single Stocks: TrackRecord Model Portfolio is tracking the broader market for now.
Key risks: The US midterm elections could cause some volatility in the markets. The Ukraine-Russia war drags on, and though the market impact is limited, the energy shortage situation could worsen if tensions should escalate.
What Happened Yesterday
The US Treasury yield curve remains inverted with the difference between the 2-year and 10-year bond yields now at 0.50%. The 2yr yield rose +0.06% while the 10yr treasury yield rose +0.05% as we head towards the Consumer Price Index Report on Thursday with markets expecting the high inflation number to spur the Fed further in their hikes.
The US stock market gained as the Republican tilt may also reduce taxes on the corporate front. The S&P 500 rose +0.96% (intraday high: +1.15%, intraday low: -0.15%), the Dow Jones increased +1.31% (intraday high: +1.51%, intraday low: +0.07%) while the Nasdaq jumped +1.11% (intraday high: +1.32%, intraday low: -0.36%).
The crypto market faced some volatility yesterday due to uncertainty over the solvency of the FTX crypto exchange. Bitcoin fell -1.6% (intraday high: +0.66%, intraday low: -2.41%) while Ether inched lower by -0.3% (intraday high: +2.35%, intraday low: -1.52%).
Headlines & Market Impact
FTX CEO Sam Bankman-Fried Denies Insolvency Rumours as Binance Liquidates FTT Token
Notable Snippet: As speculation mounted over the weekend about the solvency of billionaire Sam Bankman-Fried's FTX crypto exchange, the FTX CEO tweeted early Monday morning that "FTX is fine. Assets are fine."
"FTX has enough to cover all client holdings," he added. "We don't invest client assets (even in Treasurys). We have been processing all withdrawals, and will continue to be."
Last week, CoinDesk published a story revealing the balance sheet of FTX sister company Alameda Research was loaded with FTX's native exchange token FTT. That led to a public war of words between Alameda CEO Caroline Ellison and Binance CEO Changpeng Zhao, also owner of a sizable number of FTT tokens.
What we think: The rumours will continue to swirl and cause volatility in the crypto market and will do so for the days ahead.
BOJ debated impact of future exit from easy policy in Oct meeting
Notable Snippet: Bank of Japan policymakers debated the need to look out for the side-effects of prolonged monetary easing and the potential impact of a future exit from ultra-low interest rates, a summary of opinions at their October policy meeting showed on Tuesday.
Some in the nine-member board also saw signs the recent cost-driven inflationary pressure was broadening, with one warning that a "big overshoot of inflation cannot be ruled out," according to the summary.
While there is no need to immediately tweak monetary policy, the central bank must pay attention to the side-effects of prolonged easing, according to another opinion quoted in the summary.
At the Oct. 27-28 meeting, the BOJ kept ultra-low interest rates and maintained its dovish guidance, cementing its status as an outlier among global central banks tightening monetary policy to combat soaring inflation.
What we think: The easy policy will continue to maintain the case of the weak Yen for now. However going forward, it will be interesting to see when the central bank will turn hawkish as we might see a massive trend reversal should the Federal Reserve have to correct an overshoot of their rate hikes.
EXCLUSIVE Nvidia offers new advanced chip for China that meets U.S. export controls
Notable Snippet: U.S. chip maker Nvidia Corp (NVDA.O) said on Monday it is offering a new advanced chip in China that meets recent export control rules aimed at keeping cutting-edge technology out of China's hands.
The new chip, called the A800, represents the first reported effort by a U.S. semiconductor company to create advanced processors for China that follow new U.S. trade rules. Nvidia has said the export limitations could cost it hundreds of millions of dollars in revenue.
A distributor website in China detailed the specifications of the A800. A comparison of the chip capabilities with the A100 shows that the chip-to-chip data transfer rate is 400 gigabytes per second on the new chip, down from 600 gigabytes per second on the A100. The new rules restrict rates of 600 gigabytes per second and up.
“The A800 looks to be a repackaged A100 GPU designed to avoid the recent Commerce Department trade restrictions,” said Wayne Lam, an analyst at CCS Insight, basing his comments on the specs shared by Reuters, and noting that eight is a lucky number in China.
What we think: Although it has a slower data rate, the new chip remains a highly advanced technology that is available for Chinese technology to use. It is a positive development for the Chinese tech industry for now.
Sentiment
FX
Stock Indices
Best,
Phan Vee Leung
CIO & Founder, TrackRecord