The Week Ahead

Good Afternoon my friends.

To start the post let’s recap the previous “The Week Ahead” from June 5th.

Sub 4000 was explored though vol remains compressed.

As mentioned the dixie wants to head above 105 in the near term, we saw the greenback +2% on the week heading back to 104.19. With USDJPY seeing 134 and EURUSD down to 1.05.

BMY I closed at 76.7, SUN I closed out at 43.2 and DDOG I hold short from 108 with some 90 strike puts written for 06/17. FTSE sell began.

Below is the whole post from last week.

The Week Ahead

Moving on to the week ahead… (sorry, not open for all to see this week)

I shan’t dismiss the fact that the global macro part of my brain was switched on mid-week after the ECB announced that asset purchases would be ending soon and money markets are pricing in 145bps of hikes before the end of the year. Macro-wise markets look incredibly unattractive and many global-macro managers will be allocating cash (that’s been sitting on the sidelines) to position themselves correctly.

Reality is starting to hit all asset classes that excessive risk-taking mixed with unnecessary stimulus packages had inflated various markets beyond reasonable levels. My current stance is that all equity markets will remain in a correction until a catalyst appears to turn the ship around.

Much to my pleasure, Italian bonds and the MIB took a huge tump post ECB, the FTSE started to sell off as well as US equities. What is to come in the next week? A busy week with many events including an FOMC decision on Wednesday and a HUGE Opex on Friday.

Where could we see markets heading this week?

• Equity-wise, I expect the S&P 500 to explore 3800 with the potential to visit 3750. Dramatic it may seem, however, as we saw on Thursday and Friday 100pt moves aren’t difficult.

  • 4080, 4023, 3950, 3850, 3800, and 3720 are the levels I am watching this week.

• Bonds - I am focussing on the US 10Y seeing 3.25%, this is a decisive area as we saw in 2018, an area I have very fond memories of.

• Oil - I believe oil is nearing a new high, I think in the coming weeks we could see WTI trading back at 105-110. I still believe oil is trading at a premium to where it should be.

• Gold - Despite the dollar looking like it’ll break through 105 I expect gold to revisit 1900 in the near term and 1930 in the next four weeks.

• FX

  • EURUSD 1.04

  • USDJPY could be a really big week as we approach 135 which was a strong resistance back in 2002 - I think if broken with force USDJPY can see 136+ this week.

  • GBPUSD 1.22

  • AUDJPY range 94-95

  • USDCAD 1.29

  • AUDUSD could explore the 0.69 handle

• FOMC - ZGM2 is pricing in a 100% probability for a hike (as expected)

  • 96% probability for target rate 125-150bps

  • 4% probability for target rate 150-175bps

    • Though a 50bps hike is most likely, I do not block from my mind that a 75bps hike is possible.

    • 1st Jun - markets were pricing a 76% chance for a 50bps hike and 24% for 75bps.

  • Managers will be listening very carefully to the Fed’s literature with many expecting (speculating) that we will see a 75bps hike in September.

• Individual Names

  • I have a lot of ROKU puts expiring on Friday and expect Roku can break that 75 level this week.

  • TSLA I expect can see 630

  • AMZN 100

  • FB has the potential to explore the low 160 handle

  • Some of my shorts - expectations this week

  • HLF 20

  • I reopened a short position in OXY @ 68

    • Could see 59-60 in the near future

  • BRK.B 285

  • ULTA 400

  • CMG 1270

  • ADSK 178 (maybe)

  • SPLK 91

  • CDNS 140

  • CRM 168

  • DDOG 88

  • ESTC 60

  • Financials could have a tough week

    • JPM 111.5

    • GS 272

    • MS 75

  • Longs - remain defensive haven’t bought anything new apart from CLVT preferred (JE00BM91P354).

    • Remain long China via KWEB & MCHI with calls written against the positions.

I hope this post helps navigate the choppy waters of the week ahead. I am not bullish for this week in the slightest, but hey, we saw what happened with stocks at the last FOMC meeting.

Always remain alert as these bear market rallies are more aggressive than I have ever seen before.

Please if you have any questions, comment or if you are shy message me on Twitter :-).

Thanks for reading,

Fed