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Macro

Classic Holiday Weekend Risk Profile.. First Test For International Equity Longs


It is a three-day holiday weekend.

President Trump returns from an overseas trip. His most trusted advisor, and son-in-law, is now in the line of sight.

The next test missile launched by North Korea will be its ninth in a row. President Trump and Prime Minister Abe met in Italy to discuss North Korea. Separately, Prime Minister Shinzo Abe came under the spotlight again last night for a new scandal.

In response, to North Korean risk and Japanese political risk, the Japanese yen (JPY) is stronger relative to all G10 and all 24 emerging market currencies overnight.

Whether you want to accept it or not, global equities are now underperforming the US. The consensus view of being long on international equities and underweight the US is showing its first cracks.

Interestingly, it is doing it with the US dollar for sale, a key component of the long international equity thesis.

It will be interesting to see how investors respond or defend against the consensus positioning in equities moving against them for the first time this year.

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Macro

Yesterday's Price Action Was Hardly Capitulative


All NYSE stocks had an 81% down day yesterday. 90% is required to argue a bounce.

Put/call ratio’s barely registered over 1.0. Buyers of puts were absent.

The TRIN Index that consists of [(advancers/decliners)/(adv_volume/dec_volume)] was in line with the average daily move.

Goldman Sachs, the stock that has the most impact on the Dow Jones Industrial Average and was responsible for 40-50% of the index gains following the Presidential Election last November, traded significantly less volume yesterday than the last time it fell by more than 5%.

The list could go on but on aggregate it shows that the price action was hardly capitulative.
 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Macro

The D.C. Events Are A Distraction...Here Is What Takes It To A Disruption


For the distraction in DC to become genuinely disruptive, to the point it outweighs the excitement over corporate earnings and global economic synchronization, requires either of the following:
 

  1. Republicans (not Senators John McCain or Lindsey Graham) to distance themselves from President Trump, including sacrificing the policy agenda and timeline. Or, business leaders begin to resign from President Trump’s roundtable.

    Put another way, currently, Republicans are saying very little and falling back on still trying to enact policy. Once that stops, it will be a signal that the environment has become so toxic that policy and the timeline takes a backseat.

    Personally, we think some Republicans are a lot closer to buckling to the political pressure than the professional community believes and some business leaders never even wanted to be there in the first place. It is just a matter of time before investors model the fact that the GOP no longer has 51 votes in the Senate to pass anything.
     
  2. If former Director of the FBI, James Comey, testifies in a live public hearing before Congress and says the memo is real.

    Now you can debate whether the degree of obstruction of justice is strong enough to impeach a President (we don’t think that holds up) or you can say that a guy got fired and then a memo was leaked (he said, she said game) but with the help of the main stream media we lean in the direction that Comey wins that credibility test.

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13236




Macro

Something Less Observed But Bullish For Crude Oil As Well


There is one event we do not believe the market is aware of as it pertains to crude oil.

 

Iran has a presidential election on May 19th where the hardliners appear to be making a comeback.

 

Now we have no idea if a hardliner will win, but what we do know is the following:

 

1. Rising US-Iran tensions have been apparent in recent weeks.

 

2. Polls point to the incumbent (Western-friendly) president losing his seat to a hardliner (Source: Citigroup)

 

3. There is some newfound risk of a return of a geopolitical risk premium that went to zero last year.

 

4. We doubt many investors transient to crude oil are even aware of this event risk.

 

5. President Trump will be in the Middle East shortly, including Saudi Arabia.

 

 Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13208




Macro

Investors Continue to Favor European Assets Over US


The thesis that investors are looking to add to risk assets in Europe is being proven correct today as a number of supporting pieces of evidence have been validated.

For example, the euro exchange rate is showing the largest positive risk-adjusted return across regions and assets, and broke the upside trading range today for the first time since round one of the French Election on March 20th. Thematically, European equity periphery is showing the largest positive risk-adjusted return. Regarding pairs trading, European domestic relative to China exposure is showing the largest positive risk-adjusted return.

Here is the list that shows the US is losing:

  1. US ADP employment report yesterday morning which showed a low number on a relative basis. Views for tomorrow’s monthly employment report have been tempered.
     
  2. The FOMC meeting yesterday which highlighted concern over low growth in the first quarter. They added the word “transitory” regarding growth to their statement.
     
  3. The Prime Ministerial debate in France last night showed Macron in a more positive light than Le Pen.

 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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