Global Trade Desk- Bull or Bear? It Does Not Matter

Daily Client Note

Global Markets Review

Bull or Bear? It Does Not Matter

The topsy-turvy world of global trade continues its path of one day up and one day down, in reaction to breaking news sentiment. The unique set of fundamental circumstances unfolding as a consequence of years of miss-directed fiscal policies and institutional investment faux pas is likely to continue throughout the summer.

Wall Street opened lower which dragged the USD higher, while bullion was bought in the daily tango of global trade. It will be a relief to get the push-me pull-you farcical debt issues out of the way so that focus can switch to mid-term momentum reads.

Patience is required as the mid-term global charts go through a sideways spiral. We have been here before, many times, but this period of trade does seem to be going on forever.

Whether equity bull or bear, bullion buyer or seller, or a bond investor on the long or short end of the curve, the outlook remains the same; intra-day volatility as fair value is sought in milliseconds rather than historically over a period of days and weeks.

There are near-term trade opportunities in all markets when buying at the low of the previous session and selling at the high. These trades are available as a strategy because of the lack of mid-term chart directional sentiment and momentum.

The USD/S&P 500 inverse correlation remains strong, with equity and bond markets dominating intra-day direction across all global asset classes. Gold and Oil have started to form a near-term inverse correlation, with gold buying being met with oil selling, and vice versa. Silver trade does not yet have the strength of upside momentum seen in gold, but that may be more to do with Exchange floor margin requirement threats more than anything else.

The trade desk has highlighted over the last four years the changes that have happened in regard to electronic trading dominance, and the increase in algorithm trade that tracks momentum, headlines, price action, and sentiment. Who would have thought that Buy-and-Hold would so quickly cover just few days as a strategy, rather than the previous connotation that buying-and-holding could last decades.

Traders and investors have not been in such reactive market arenas before, which is a pure reflection of the technical advancements globally that has all aspects of daily life impacted by the speed in which information now travels.

The relentless desire to get information quicker than yesterday, in an effort to respond sooner, has transposed itself into traded markets that are truly 24-hours and are so completely globalized now that regional 9-to-5 trading is virtually obsolete.

Those looking for a flowing bell curve effect on their investment portfolio will not get it by trading and investing in regional markets only; gaps in closing/opening prices due to global momentum swings are prevalent. The long-term investor will have to introduce a near-term mix of global exposure to their portfolio.

Global exposure can be achieved via futures trade, which most see as specialized market verging on the dark side of the moon, via overseas accounts, which the US administration is determined to end, or via currency trading which remain the most liquid of all global traded markets.

As a balance to equities and bonds held over the longer term, exposure to forex offers easy access, low margin requirements, and access to global momentum. Equity and bond sentiment leads, and historically forex follows, creating a tradable balance to the buy-and-hold swings and dips.

Whether equity markets go on a bull run that has S&P 500 breaking 1350 and 1370, or has a bearish reversal that tests 1295 and 1275 is literally a coin-flick in the current headline-dominated trading environment. The reaction to either move however is tradable, via the currency markets that will track both bull and bear equity trade with a high daily correlation.