STATE OF THE MARKETS

Stocks slipped ahead of inflation. US stocks slipped lower on Thursday ahead of the inflation reading that is expected to cool off (0.9% to 0.6%) on Friday. Nasdaq (-1.71%), S&P (-0.72%) and Russell (-2.27%) closed in the red while Dow (0.0%) was little changed as jobless claims fell to the lowest since 1969. Flight to safety was noted as yields fell with the 10Y below 1.50% while Dollar (DXY) bulls regained the 96.20 barrier.

In the commodities market, crude edged lower as traders took profits ahead of the weekend. The black gold settled around $70.45 as New York closed. Gold was fixed lower to $1,775/oz as Dollar continued to strengthen on the back of Fed’s tapering next week. Elsewhere, iron ore stalled at $106.80/oz as bidders waiting for new catalysts from US infrastructure projects.

In the FX space, short term traders seemed to follow bearish long term sentiments as Yen and Dollar flipped to demand alongside Sterling. Medium term investors seemed less bearish as more Swiss was offered than Yen. On Friday, markets look for earnings reports from Academy Sports (ASO) as well as the much awaited US CPI and consumer sentiment.

OUR PICK – No New Picks

No new pick going into the weekend. Short term money markets continue to receive massive inflows as long term investors cashed out of the equities markets. In search of returns investors have looked beyond traditional bonds as bonds’ returns are now below inflation. Real yields are negative and that is why we see the advent of cryptos and now NFT to create returns.

Inflation reading on Friday will decide whether the Fed is going to taper faster and hike sooner than later. At this point, the market is pricing more than 60% probability that a hike is coming in May next year and the Dollar continues to reflect that. Once that is done, we might see a Dollar retreat as investors look for bargains somewhere else.

Trades updates: 

Equities: Currently we are holding 8 stocks – 7 longs and 1 short. We are long AUY (21% undervalued) with dividends yielding 3.08%, T (20% undervalued) at 9.07% yields and COG (CTRA) (16% undervalued) yielding 2.40%. CLVS is currently 21% overvalued with -7.19 z-score but Tudor Investment had stepped in recently and we decided to hold. We remain bullish with VIPS (47% undervalued with 5.59 z-score), GT (39% undervalued with 1.28 z-score) and CRON (13% undervalued with 9.18 z-score) while bearish GE (15% overvalued with 1.43 z-score).

FX & Commodities: GBP/JPY and GBP/NZD remain active.

Risk Disclaimer:

This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities/oz. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.