Good morning,
DXZ0 93.555 +0.628 GCZ0 1886.0 -25.9 ESZ0 3330.50 -52.50 CLZ0 37.71 -1.86
RISK OFF!
As most of Europe moves towards permanent lockdowns, and the coronavirus rates in the US are undergoing a serious uptick, markets finally are facing the reality of a second major roadblock to global economies is virtually upon us. It’s a sea of red across most of the markets, with the exception being the safe havens, the US dollar index and fixed income markets. Gold, the usual safe haven asset of choice, has also come under pressure in the overnight trade. The most logical explanation is that gold is being sold in an effort to raise cash for increased margin calls which are inevitable with some substantial moves down in numerous markets.
The commodity sector has been a major attraction for the past couple of months. Speculative funds have been playing many of these markets from the long side, as the combination of increased inflation risks, hopes of economic recovery, and supply/demand balances shifting to the demand side. China has been an aggressive buying of necessary commodities, trying to secure resources ahead of any logistical issues that evolve from a second wave of the pandemic sweeping across the world.
Many commodities had positive fundamental stories of their own, in addition to what is mentioned above, and this drew the funds to them. These markets observed significant rallies, and were poised to push even higher, in part driven by additional US stimulus picking the economy up by the bootstraps. Well, the stimulus doesn’t appear to be anywhere on the horizon, and now the market is facing the drama of the most likely drawn out US election outcome. The Federal Reserve meets next week, and with no fiscal stimulus arriving, many in the market are questioning if the Fed will consider additional monetary stimulus to assist. This week’s actions taken in Europe, and in the US at the state and local levels to prevent virus spread will give the Fed members more evidence to ponder the need to be more aggressive, in an attempt to keep the economy alive.
All this being said, fund long positioning, as seen in the COT reports from the CFTC, have grown throughout this autumn. With the growing unknown facing the world again from “wave 2”, taking a profit and getting positions pared down or even flat appears to be the general theme across these markets. This Friday being month end most likely intensifies this selling pressure. It’s difficult to argue with this mentality, is the world is potentially going to stop again. Thus looking at most markets today, the story will be economic stoppage impacting demand. Oil, copper, grains and most markets are under pressure, and could remain so throughout the week.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX0 1004.00 944.75 914.00
CZ0 375.25 356.25 359.50
WZ0 569.50 543.50 546.50
KWZ0 500.25 476.50 486.00
MWZ0 542.25 535.50 545.50
SMZ0 337.4 316.7 310.2
BOZ0 33.19 31.45 30.36
CLZ0 40.88 40.96 40.38
GCZ0 1928.0 1897.3 1780.5
LHZ0 62.435 57.335 57.975
LCZ0 110.000 108.750 107.940
KCZ0 116.15 111.55 113.05
CCZ0 2516 2403 2425
CTZ0 66.68 64.22 62.76
SBH1 13.57 13.17 12.93
JOF1 117.25 121.85 118.75
HGZ0 303.30 292.40 269.50
HOX0 117.47 122.02 127.98
XBX0 117.25 114.92 110.71
NGX0 2.792 2.603 2.483
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404