The UBS team retain their bullishness with the recent ‘melt up’ being consistent with a short squeeze and therefore highly likely that a retrace comes now given the short covering that has occurred as the levels got blown over. This fits with the bearish sentiment in the market we saw before the melt. I also expect some sort of violent retrace here given the short capitulation, which we seem to have had given the sp500 hit 1255 or so but whats more many instruments stepped into breakout zones.. ie therefore everyone (& their dog’s stops were hit).. Consistent with this would be a retrace now and given the newsflow a ‘violent’ retrace at that. We had breakouts apparently hit on oil, audusd, gbpusd, etc etc.. Note the CRB did not break her down trend but the move up hasn’t been very convincing as yet and no resistances broken to the upside, yet.
Personally, I’m expecting a surprise to the downside move up to 50% retrace of this leg but who knows.. If i see this i would be a buyer.. for the moment im retaining some leverage to the upside with the ym shorts running. Im keeping the new gold additions which are running and well in the money for the moment. Im weighted at around 115 cash leverage with the shorts netting this down to 90% or so.. The fx position remains weighted to USDs which is a hedge of sorts to the equity position.
(3 votes, average: 5.00 out of 5)
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