The grind continues…
Stay with the trend.
With nothing much to really drive the markets either way, the natural tendency is for the risk assets to grind higher. Relentless money printing is all the reason you need.
Stay with the trend.
Cut Your Losses, Hold Your Gains
If you want to be successful in trading, this is something you must learn. People often do the opposite of the motto due to the psychological barrier of loss aversion, making them reluctant to close losing positions. This reluctance can also be due to the fear of missing out in the event that the position may possibly start to perform once again.
Holding on to gains is difficult for some as the closing of winning positions gives a sense of achievement of being right on the trade and having the profits locked in. Uncertainty is what humans tend to avoid when dealing with winning and earning. Locking in profits gives them a boost of feel-good hormones.
However, trading is not an endeavour to try to maximise short term gratification, but to maximise profits while minimising losses. Do as the title says, and you will be on the right track.
UK and Canada CPI will be on the radar today. More important will be the Canada CPI which will influence the monetary policy of the Bank of Canada.
Keep short USD and long NZD, & CNH. USD is now breaking key levels. Staying short is the only game.
2. Commodities: Uranium & Energy — Stay invested.
Key risks: Higher US bond yields, and Fedspeakers’ thoughts on the tapering process
Equity Index: Long Nasdaq futures. The grind higher will continue. Stay long.
Single Stocks: TrackRecord Model Portfolio themes are well underway. Get involved and stay involved. `
Key risks : Higher US bond yields, and Fedspeakers on the tapering process in the days ahead
WHAT HAPPENED YESTERDAY
- The U.S. Dollar Index fell -0.14% to 93.81. The dollar dipped after data showed that U.S. homebuilding unexpectedly fell (1.56m vs expected 1.61m) in September and permits dropped to a one-year low amid acute shortages of raw materials and labour, supporting expectations that economic growth slowed sharply in the third quarter. Richmond Fed President Thomas Barkin said on Tuesday that U.S. labour shortages may outlast the coronavirus pandemic and limit overall economic growth unless the country comes up with better education, health and childcare policies to boost the number of people willing and able to work.
- Risk currencies (AUD & NZD) showed strength as risk sentiment improved.
- The GBP rose +0.49% to $1.3793 as money markets priced in a cumulative 35 basis points in rate hikes by the end of the year.
- CNH hit a four-month high as fears about contagion from property giant China Evergrande’s debt troubles receded and some of its peers made bond coupon payments. Policymakers said late last week the situation was controllable. The offshore yuan strengthened to as much as 6.3768 (USD/CNH), the strongest since June 1.
- S&P 500 (+0.74%) and Nasdaq (+0.72%) both advanced 0.7% on Tuesday and extended their winning streaks to five sessions. Risk sentiment was supported by better-than-expected earnings reports from a diversified group of companies while the market continued to weather supply chain challenges.
HEADLINES & MARKET IMPACT
Biden, Democrats aim for deal on spending package in coming days
Notable Snippet: U.S. President Joe Biden and Democratic lawmakers are edging toward a deal on the scope of their cornerstone economic revival package and hope to reach a compromise as soon as this week, people briefed on the negotiations said on Tuesday.
Scrambling to broker an agreement, Biden met with 19 lawmakers on Tuesday in an unusually busy day of legislative negotiations. He aimed to secure what may be the signature effort of his administration, a multi trillion-dollar, two-bill legislative package that expands social safety net programs and infrastructure spending.
Biden told Democrats in a private meeting that he believed a deal could be reached between $1.75 trillion and $1.9 trillion, the Washington Post reported on Tuesday evening.
COMMENTS/IMPACT: At last, Biden’s efforts are coming to fruition and the next flood of money is coming. This package is the cornerstone of his administration and will determine the Democratic party’s performance in the midterm elections.
China coal prices plunge from record high as govt considers intervention
Notable Snippet: The sell-off came after the National Development and Reform Commission (NDRC) said government intervention in coal prices was discussed at a meeting of key coal producers, the industry association and the China Electricity Council on Tuesday.
“The current price increase has completely deviated from the fundamentals of supply and demand,” the NDRC said. “The heating season is approaching and the price is still showing a further irrational upward trend.”
Chinese law allows the State Council, China’s cabinet, and regional governments to limit profit rates and set price limits when prices for important goods or services rise sharply, the NDRC said, vowing to crack down on any irregularities and maintain market order.
THEMATIC CONTEXT: “This is the real elephant in the room for China, a power supply crunch will have a material impact on GDP and growth on China as opposed to the Evergrande situation and we should be alert to the developing situation. We have been heavily positioned in energy and warning about this acute problem since 2020, it seems that things are playing out as projected. Hold onto your hats as traditional energy will be back in vogue.” — 28th Sept 2021
COMMENTS/IMPACT: This was the reason why coal-related stocks fell last night. In the grand scheme of things we believe that this changes nothing. As long as there are no talks about immediate expansion of supplies capabilities, any financial reforms on a commodity that is bid to bits will only be as effective as sprinkling water on a raging fire. It psychologically works for a short while.
GE mandates COVID-19 vaccines for U.S. workers
Notable Snippet: General Electric Co (GE.N) has asked its U.S.-based workers to get COVID-19 shots or seek medical or religious accommodation by Dec. 8 in order to comply with U.S. President Joe Biden’s executive order.
As a federal contractor, GE said it is complying with the executive order. The company updated its vaccine policy for more than 50,000 U.S. workers last week.
THEMATIC CONTEXT: “We suspect that Biden’s vaccine mandate will put a dent in US jobs recovery growth as the country is polarized over vaccine politics and believe that many will either voluntarily quit or be fired from their jobs. The result will be a goldilocks economy that forces the hand of the FED and Government to print and support easier monetary policies. Stay invested.” — 18th Oct 2021
COMMENTS/IMPACT: Vaccine politics is causing job losses and the working class is weaponizing the already acute labour shortage situation to leverage for more pay. We suspect that wage price inflation is on the cusp of an uptick and this makes the overall inflation picture less “transitory”. In addition, with a potential goldilocks economy due to high unemployment, we believe that easy monetary policy is here to stay much longer than most expect and asset prices have much farther to go than one can imagine.
Phan Vee Leung
CIO & Founder, TrackRecord