A change of view and it’s only been a day from my Weekly entry…
Why a change of view?
Broad risk bounced yesterday when it was all looking so bearish after last week’s 3-day taper/dot-plot tantrum…
inflation expectations bounced strongly yesterday above Thursday’s closing level causing yield curves to steepen back up, and…
reflation trade is alive and kicking — Cyclicals up top, Defensives down low.
This is all causing me to question my weekend view…
Looking ahead:
We have Flash PMI’s, US PCE, BOE and Fed speakers — I believe data will again highlight inflationary pressures, BOE will be optimistic off the strong reopening rebound, and Fed speakers to allay fears of quick policy tightening to avoid a repeat of the 2013 tantrum scenario.
Asian markets have traded positively today and as long as this sentiment holds across markets, I will be playing along as this is imo feeling like a bear trap given what we have on deck this week also.
Weekend view:
Sell reflation (DJI RUT Comm-ccys) and Buy defensive/quality (USD NDX)
Cautiously updated view:
Buy reflation etc. (essentially the reverse)
Current trades:
Long Gold (what was initially meant to be a quick tactical day trade)…
Long Cable…
Could be wrong about changing my view just off one day’s action, but the moves were very convincing and it just seems ‘too much’ for risk to simply cave, all things considered.
Good luck.
