Macro Digest: Quick Strategy Update: US$ is your lead CATALYST...

 

We are now 75% of the way in terms of correction – VaR explosion is driving momentum and the marginal selling…..

 

Levels:

 

I have taken back (in system overrule) short in S&P and DAX, remain long EURSD and Gold.

 

S&P: Target 1875/1825  (another 5-6%)

Dax: 9310(9400

 

These levels fit correction depth and magnitude of prior moves. Chart to follow this pm.

 

Bank sector should hurt the most due to much flatter yield curve…..

 

 

 

 

Timeline:

 

We will be looking at FED hike still… September now priced @ 30% probability and December @ 56% - in other words – unlike other BTFD scenario's we don't have "guaranteed" support from US monetary policy, I still see Fed hiking as markets and price of money needs to clear at a higher interest rate price: ie. 100-200 bps higher. The September FED event will keep market nervous and highly volatile into the actual meeting.

 

Macro drivers:

 

The US$ is EVERYTHING – the DXY now leads the stocks market with R2 of 80%....... hence the "sell-off" in US$ over last three trading session is NET POSITIVE…….for markets/support.

 

Overall this correction was born not by China devaluation but by having a FIAT economy driven US$ debt….. the strong US$ hurt commodities, lower commodities hurt fiscal and FX rates in high volume growth countries (EM+ CHINA) and now full cycle to export driven markets like Germany and Europe overall.

 

Watch the US$ for LEAD in support or lack of it in markets.

 

OVERALL:

 

If my WEAKER US$ get further confirmation I will be looking to add Emerging markets to my portfolio

 

 

Full Steen's Chronicle this p.m

 

Steen

 

 

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
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