UBS are of the view that the low is likely in for this leg of the cyclical bear. They do leave the door open to a retest of the lows of this leg in the next week or so but recommend any such move as a ‘buying opportunity’. October rebound scenario. Sectors etc are in the report. Summary, buy pro risk on session (inc banks as a trade) weakness as a multi week run up in asset prices is likely to occur.
I would concur with this approach. My shorts are significantly lighter than they were. I’m holding less than half of the position i was in this respect and i’ve added more equity with a little leverage. I’ve also shifted some assets from utilities and fixed income to pro risk. I still hold a large USD position and have not covered this as yet. The euro money printing may prove beneficial for the euro in the very short term as it will prevent a breakdown in the euro. But more euro supply is unlikely to support her in the medium term. This plays into pms and commodities. The stage is set for equity markets to rebound but commodity prices to lag a little inc gold and silver. The USD may stay surprisingly strong. USD equities are likely to be an excellent asset class over the next couple of months therefore.
News wise it seems very likely we get significant monetary actions over the coming weeks. The equity rally could be quite significant. The ‘technical damage’ is clear but i wouldn’t get too carried away by this technical damage issue. Ok, we have to respect what wiser and older heads tell us in this respect but i would again point to tables and other asset charts from prior monetary lose markets. Did the 50 to 70% annual Mexican retraces in their asset markets provide enough ‘technical’ damage to stop their nominal asset bull markets from sustaining?
Clearly the answer was a resounding NO. I don’t deny ‘technical’ damage will be an issue and may raise its head now and again on weakness but a far greater issue is monetary action, imo. Governments and central bankers are 100% certain to get nominal asset prices to rise so long as they have a printing press at their disposal. You are truly optimistically naive if you believe notions of democracy will stand in their way. The paradox continues.
Update to the CRB (commodities index) that i put up the other day.. nicely bouncing off the trend line.. I suggest we will see renewed crb weakness before the real push on however in tandem with USD relative strength for a while.
All the best
Rich
(4 votes, average: 5.00 out of 5)
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