TRACKRECORD DAILY
Published in

TRACKRECORD DAILY

Will the market continue to rise?

Volatility measures have been falling

As we’ve pointed out before, with no news being good news for the stock market, good news will be interpreted by investors as great news. So news that Russia is willing to pull back troops from the capital city of Ukraine and de-escalate the situation led to a strong rally in risk assets. The tech-heavy Nasdaq index is now back at levels last since early Feb.

Though many experts and financial pundits are calling this a bear-market rally and saying that this rally should be sold into, it is important to remember that this rally is happening despite increasing expectations of more aggressive interest rate hikes from the US Federal Reserve. Should data on the inflation or jobs front soften, these expectations will fall off and that is likely to lead to another rally in risk assets.

Volatility measures of the US stock market have been falling for nearly 3 weeks now. Under-invested investors who have been looking to buy will likely do so on dips going forward.

TRADING TIP

Do not be fooled by noise

The market is a place where the information flow is rampant. you have both prices and headlines coming in and it can be mind boggling for you to sieve out the signals from the noise. Once you are fooled by the noise, you may start to get thrown off and lose sight of what is real.

One way to circumvent this is to have a well-thought out thesis of what you think will happen. And using this thesis, you can assess how important the information flow you have is to the thesis. This way, unimportant information can be ignored and only signals will be noticed and remembered.

Trying to do this may not be simple, but it will help you from being swayed by short-term movements that do not last.

DAY AHEAD

US ADP Employment Change will be released today. Response should be relatively muted given that the more significant job data, US Nonfarm Payrolls and Unemployment rate, will be released on Friday.

TRADING PLAN

1. Currencies:
CNH
— Keep short USD against CNH. Resistance at 6.40–41 is likely to hold for now. Once again, USDCNH is easing off the resistance level. Stay short.

EUR — Short the EUR. EUR bounced on the news that Russia is withdrawing troops from Kyiv. Resistance level was tested but it is holding for now. Stay short.

2. Commodities: Uranium & Energy — Stay long.

3. Stocks:

US Stock Index: Stocks continue to grind higher as the good news from the war front hit the headlines.. Buy on dips remains a valid strategy.

Single Stocks: Stocks in the TrackRecord Model Portfolio are all starting to trade strongly. Get involved!

Key risks: The Ukraine situation is the primary focus and comments from Fed officials on the pace of future rate hikes will affect interest rates expectations.

WHAT HAPPENED YESTERDAY

Market Movement As of New York Close 29 Mar 2022
  • Following yesterday’s peace talks in Turkey, Russia has pledged to scale down its military operations in Kyiv and Cherinhiv. However, all may not be well yet as US and Ukraine President Zelenskyy warned that it is prudent to stay vigilant despite the pledge.
  • The US Dollar Index fell by -0.68% as risk sentiment improved across the board. The 2 year US Treasury bond yield was unchanged at 2.35% while the 10 year yield fell by -0.05% (5 bps) to 2.41%.
  • Stocks continued to rise as risk sentiment improved from the results at the peace talks. The S&P 500 was up +1.23%, Dow Jones rose by +0.97% while the Nasdaq increased by +1.68%.
  • Despite what seems like an improvement in the war, oil prices went higher with Brent Oil spot climbing +1.73% as the American Petroleum Institute reported that crude oil inventories fell by -3 million last week, 3 times that of what analysts expected.
  • The crypto market continued higher as risk sentiment improved. Bitcoin was up +0.7% while Ether rose +2.2% to 3,402.

HEADLINES & MARKET IMPACT

Russia repositions troops away from Kyiv, marking a shift in the war

Notable Snippet: The Russian military has begun to move some of its troops in Ukraine away from the areas around Kyiv to positions elsewhere in Ukraine, Pentagon press secretary John Kirby said Tuesday, part of a strategic shift in its monthlong invasion of Ukraine.

“Up until recently, we had still assessed that their plan was to occupy and annex Ukraine using approaches along three lines of attack,” Kirby told reporters at the Pentagon. “Now we think they’re going to prioritize the east” of Ukraine.

Russian troops convoys “have been stalled in the north” around the capital, he said, while initial Russian progress in the south had also “stalled out.”

WHAT WE THINK: While this may seem like a positive development, it could be a move done just to confuse the Ukrainian army. Recall that Russia has failed to deliver on its promise of a ceasefire just a few weeks back. Stronger risk sentiment from this may fade.
For more actionable content with our levels and views, sign up for our Membership to get the full length version of our Dailies.

Fed’s Patrick Harker says he thinks the U.S. can avoid a recession, even amid troubling signs

Notable Snippet: That view, expressed in a CNBC interview, comes in the face of a looming inversion of the 10- and 2-year Treasury yields and market expectations that the Fed is about to embark on a substantial rate-hiking cycle aimed at curbing inflation.

Harker said he thinks the current state of the economy is strong enough to withstand both tighter monetary policy and bond market fears of what that will mean to growth.

“What I’m looking for is a safe landing,” he told CNBC’s Sara Eisen during a “Power Lunch” interview. “It may be bumpy along the way. It was bumpy going up, it’s going to be bumpy coming down. We’ve all been on those planes. We land safely, but it would be a bit of a thrill ride. I don’t want that. So that’s why we’re being cautious and careful about how we implement policy.”

WHAT WE THINK: The Fed has already said that their policy decisions from now will be data dependent. Even as the Fed tapers, fiscal stimulus is still being pumped into the economy to rebuild and strengthen it. We believe that the data going forward will allow the Fed to continue its current trajectory and the US economy is in for a soft landing.

For more actionable content with our levels and views, sign up for our Membership to get the full length version of our Dailies.

Crypto hackers steal over $615 million from network that runs popular game Axie Infinity

Notable Snippet: Axie Infinity’s Ronin Network said in a blog post on Tuesday that it lost around $615 million in USDC (a U.S. dollar pegged stablecoin) and ethereum, surpassing the $611 million hack of the DeFi protocol Poly Network in August 2021.

But the attack took place on Mar. 23, when exploiters used hacked private keys to forge fake withdrawals, the blog post said, adding that other key validator nodes were compromised.

Ronin said the breach resulted in 173,600 ethereum and 25.5 million USDC being drained from the Ronin bridge in two transactions, which can be viewed on Etherscan. The project lost around $615 million at current prices.

WHAT WE THINK: Hacks on crypto networks may sound scary but they will serve to bolster the security of future DeFi applications. If possible, try to keep your cryptos on networks that are more secure and used widely to prevent such occurrences from affecting you.

For more actionable content with our levels and views, sign up for our Membership to get the full length version of our Dailies.

SENTIMENT

FX

STOCK INDICES

Best,
Phan Vee Leung
CIO & Founder, TrackRecord

Want to receive this in your inbox daily? Subscribe to the mailing list.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store