TRACKRECORD DAILY
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TRACKRECORD DAILY

Why does the market feel so boring?

Till we see a big surprise on the data front, expect this low volatility environment to persist for now.

Although the US stock markets are making all-time highs almost every day, there seems to be a lack of excitement in the daily movements. Volatility continues to drop, with the Vix index (a measure of US stock volatility) dropping close to the year’s low in the mid 15% after a brief spike to 25% in the brief panic sell-off in mid July.

There could be many explanations for this snoozefest of a market — summer trading months of lower volumes, lack of big surprises on the data front but a good contributing factor, I believe, is that the Federal Reserve is doing its best not to surprise the market on its future policy direction.

Although we seem to be headed towards the start of the Fed’s tapering of its massive bond buying programme, the market is being deliberately conditioned for the eventual change by Fed speakers who are advertising the change in their tone on a daily basis in the press.

Till we see a big surprise on the data front, expect this low volatility environment to persist for now.

Trading Tip

What not to do when the market is boring?

It’s imperative to not try to force a trade when the trading ranges are relatively small compared to the average moves of the recent past. Trying to force the issue just to get involved or meet some random trading target is a recipe for disaster.

Trades should only be done when they meet all the criteria that are in your trading process. This is especially true for the risk vs reward characteristics of every trade that comes onto your radar.

Trying to just do trades because you think you need to meet a daily or weekly target for your P&L is a sure way to get yourself into trouble and end up overtrading. Much of successful trading is about preparation and not about trading.

TR & LTG: Stay focused and stay updated. Wait for the right moments to strike!

DAY AHEAD

US Export & Import Price Indices are unlikely to have much of a market impact. University of Michigan Sentiment could be of interest, especially the Inflation Expectations component. Risk sentiment will be dictated mainly by the stock market and US yields movement. .

TRADING PLAN

1. Currencies:

Keep short USD and long NZD, & CNH. Still stuck in a range. Stay patient.

2. Commodities: Uranium & Energy — Stay on the path.

Key risks: Spread of the delta strain, and comments from Fedspeakers regarding the tapering process are the key drivers of risk sentiment for now.

3. Equities:

Equity Index: Long Nasdaq futures. Stay long and patient. Look to buy dips on approach of support levels at 13950–14000.

Single Stocks: Every dip is a chance to get involved. Don’t miss out on the asymmetric opportunities we have highlighted in our TrackRecord Model Portfolio.

Key risks : Spread of the delta strain, and Fedspeakers comments on the tapering process will dictate the market risk sentiment for now.

WHAT HAPPENED YESTERDAY

Market movements as of New York Close 12 Aug 2021
  • Higher than expected US PPI (7.8% vs 7.2% expected) increased the fear of an earlier start to tapering by the Federal Reserve but did not have a lasting impact on the market. Weekly initial jobless claims declined to 375k as expected, keeping the narrative of a strong jobs market intact.
  • The U.S. Dollar Index was relatively unchanged at 92.98 on Tuesday but gained almost 0.5% against both the AUD & NZD.
  • US 2-year Treasury Bond yield remained at 0.23%. 10-yr yield increased 1 basis point to 1.36% after spiking a few basis points higher after a tepid 30 year US bond auction.
  • S&P 500 (+0.3%) and Dow Jones Industrial Average (+0.04%) set new closing highs on the hopes of increased spending from the infrastructure plan. The NASDAQ (+0.4%) rose higher on a quiet day after briefly trying to lower by around -0.5% on the day.
  • A rotation to Tech could be at hand as the leading sectors of the previous few sessions, namely Industrials, Materials and Energy, became the worst performers in yesterday’s session.

HEADLINES & MARKET IMPACT

Suspected hacker behind $600 million Poly Network crypto heist did it ‘for fun’

Notable Snippet: More than $600 million worth of crypto was stolen in the cyberattack, which targeted a decentralized finance platform called Poly Network.

On Tuesday, a hacker exploited a flaw in Poly Network’s code to steal the funds. According to researchers at blockchain security firm SlowMist, Poly Network lost more than $610 million in the attack.

Israel set to offer COVID-19 vaccine booster shots to under 60-year-olds

Notable Snippet: But with the spread of the Delta variant across the globe, new infections jumped in Israel, reaching 5,946 on Monday, and serious illnesses have been increasing as well.

An initial survey has shown that most people who received a third vaccine dose felt similar or fewer side effects than they did after receiving the second shot.

Taliban claim capture of Kandahar, Afghanistan’s second largest city

Notable Snippet: The Taliban have claimed the capture of Afghanistan’s second largest city, Kandahar, in what would be a major win for the militants.

The city was once the Taliban’s stronghold, and is strategically important as a leading trade hub.

The insurgents have moved quickly, seizing new territories as US and other foreign troops withdraw after 20 years of military operations.

Within hours of each other on Thursday some of Afghanistan’s most important cities were captured — Herat, Ghazni and Qala-I-Naw came under Taliban control.

SENTIMENT

FX

STOCK INDICES

Phan Vee Leung
CIO & Founder, TrackRecord

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