Morning Note: Acute Myopia

The EU and the UK hard deadline to ink a trade deal, well, wasn’t so hard after all. Yesterday’s news that they’ll go the extra mile has global stocks in celebration mode this morning — although the breadth among U.S. sectors is suspect (financials, industrials, materials and energy are actually down as I type).

Also helping equities (well, save for the key sectors mentioned above) this morning is optimism over U.S. budget talks, and more hints that global central banks will stay in the mood to print as far as the eye can see. Of course the latest vaccine news is notably bullish as well…

10 of the 16 Asian equity markets we track closed in the green overnight.

Europe’s in a good mood as well, with 14 of the 19 bourses we track trading higher as I type.

U.S. major averages are green across the board to start the day: Dow up 117 points (0.39%), SP500 up 0.48%, Nasdaq up 1.13%, Russell 2000 up 1.12%.

The VIX (SP500 implied volatility) is down 1.54%. VXN (Nasdaq i.v.) is down 2.90%.

Oil futures are down 1.42%, gold’s down 0.67%, silver’s down 0.38%, copper futures are down 0.48% and the ag complex is flat (0.00%)

The 10-year treasury is down (yield up) and the dollar is down 0.23%.

Weighed down by energy, gold, AT&T, silver and financials, our core portfolio is flat (-0.01%) to start the day. Tech, healthcare, utilities and Eurozone equities are rallying nicely, but only enough to counter the sectors in sell mode thus far.

It’s ironic that the dollar’s down this morning and most of the traditional weak-dollar plays are taking a hit. 

With regard to gold, given how it’s traded of late (correlations), I’d attribute it to the spike in treasury yields this morning. But the spike in treasury yields denotes better economic sentiment, and that would typically buoy oil, copper, industrials, materials and financials — and they’re all down this morning. Hmm…

Well, one day of course never a trend makes… For now we’ll attribute it to a bit of rotation/profit-taking amid a market that is utterly afflicted with acute myopia… Not to mention the fact that the Euro and the Pound are rallying hard on Brexit-trade-deal optimism — largely (if not entirely), by themselves, explaining this morning’s dollar weakness…

Of course we’ll be careful with our narratives — related to both short and long-term market setups — for

“it is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”

 –House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again

Have a nice day!

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