But yeah, it certainly feels like it when seemingly every "relief rally" is met with fierce selling.
In our morning analyst meeting today, the team was lamenting the fact that it seems any levels of support that might seem obvious are proving to be nothing more than mirages. Levels are getting taken out everywhere.
This makes it increasingly frustrating to put on any kind of range-bound delta neutral plays. Yes, volatility is high and its very tempting to put Iron Condors or Strangles on here. But if we're looking for instruments that are likely to stay within a certain range, we just don't have any confidence right now in any levels on our screens.
The last few days have seen one of the largest unwinds and destruction of wealth in crypto history.
By historical standards, the collapse in the Terra ecosystem will go down as some of the most wide-reaching, systemic stress the asset class has endured.
We want to dedicate a good portion of this week's crypto letter to why UST failed, how it impacted other assets, and our outlook following this event.
Two of the top commodity currencies – the Australian and Canadian dollars – are undercutting the lower bounds of their current ranges and making fresh 52-week lows.
These breakdowns mean the path of least resistance is now lower. If these are valid resolutions, we’re looking at increased headwinds for risk assets.
Let’s look at a couple charts of the AUD and the CAD, highlight the levels we’re watching, and discuss what continued weakness in these major currencies means for stocks and commodities.
First up is the Australian dollar-US dollar cross:
A risk off environment persists. Leadership areas are coming under pressure as market correlations rise (as they typically do in periods of stress). We are reducing our exposure and move to the sidelines to ride out this period of volatility.
It’s hard to get away from the crowd when you only ask the questions that everyone else is. When we ask better questions, we get more relevant answers. The questions being most asked right now focus on whether we are going into a bear market and whether we are seeing capitulation (“Was that the bottom?”).
A bear market has been evident beneath the surface (at least since late 2021, but in some ways for over a year). It’s now showing up in the indexes. The Value Line Geometric Index is below its 2018 highs (as well as its Jan 2020 pre-COVID peak) and is in a 20% drawdown (the line in the sand many use to identify bear markets).
I understand the allure of trying to call a bottom in real-time (or close to it). But I’ll let the market sort that out. The crowd, focusing almost exclusively on their favorite sentiment data, has been doing that all year and so far at...
The market remains in a volatile territory. We have just a few industry groups which continue to show relative strength. The defense sector is one of them.