Thoughts on tactics and an historical milestone

It's a bank holiday in the UK today, so at least British chiropractors and osteopaths can look forward to a day of relief from treating market-related whiplash.   Not so their US counterparts, as futures are trading on the back foot Sunday night in New York.  Sunday night market moves are, of course, notoriously unreliable and prone to overshooting then reversing- it's almost as if someone has a vested interest in spooking the market!  (As opposed to spoofing, which anyone living in their Mum's spare room can tell you is a one-way ticket to perdition.)

Macro Man was interested to see Li Kequiang reassure the public that the RMB would not continue depreciating....(at least not til after the parade, he whispered.)  Of course, the SNB has already provided ample evidence this year that official reassurances about the stability of pegged exchange rates are worth about about as much as a child's fistful of Monopoly money.

Woe betide those engaging in rumor-mongering or other unsavory activities, however.   News over the weekend suggesting that the Chinese authorities had rounded up nearly 200 miscreants for spreading disinformation.  Woe betide Mr. Li should he fall out of favour!

Macro Man corresponded over the weekend with his former assistant, who is living out his own personal version of On the Road  by meandering throughout Asia for much of the year.  Having spent much of the time in China, where he has family, Jimbo noted that the average Chinese doesn't really care about the stock market, which is only for the select few.  Of course, if the select few represents only 10% of the population, that's still 130 million frenzied punters....which naturally is a major part of the problem.

Elsewhere, it's been a tumultuous month for investors across a number of different strategies, and it would come as little surprise to see a lot of rather large absolute values in the monthly readings- both positive and negative depending on strategy and nimbleness.  On balance, however, the market has recently selected heavily towards strategies that benefit from rising assets and low vol,  so on balance the reading is probably not too pretty.

How will that inform punters' decisions for the rest of the week?   Obviously, with payrolls on Friday the will they/won't they for the Fed will receive either a small wedge in the door to keep it ajar....or a large iron nail hammering it shut.  Rightly or wrongly, it now feels like financial markets rather than economics will dictate whether the Fed pulls the trigger next month- and markets have a funny way of throwing their toys out of the pram to get what they want.

Macro Man was intrigued to observe that the SPY stopped at the 61.8% retracement level of the "down the lift shaft" drop, almost to the penny.  The thing about Fib lines is that if you draw enough, of course you're bound to find some that appear to define the price action.   That having said, it's a useful rule of thumb that most corrections retrace roughly half of the original move, give or take an eighth or so.

In that vein, it looks like if equities are going to stop and have another look lower, it should happen from here.  (Easy enough to write when futures are already down a percent and a bit!)  The risk/reward from selling with a stop above last week's high looks pretty good, though holding such a position through payrolls (or even Draghi on Thursday) is probably unwise.  Similarly, anyone who bought the break in oil referred to on Friday might do well to set a stop at levels that lock in at least a modest profit.  The good news is that volatility is sufficiently high that you don;t have to wait long to see some pretty sharp movement.

Finally, it's worth noting a bit of a milestone that occurred over the weekend.  West Ham United won at Anfield, home of Liverpool FC, for the first time since 1963.  To put that in perspective, the day before that match in 1963, the SPX closed at 73 (erroneously reported on Twitter over the weekend as 65.  Mea culpa.)

It's left for the reader to decide whether that says more about the Spooz or the Hammers....