Not going to judge it and don’t care about the 5% & 86 % rule I’m still cleaning spilled milk off my Moroccan-style Crate and Barrel rug

Asia Wrap
 
Not going to judge it and don’t care about the 5% & 86 % rule.
 
A sober assessment of economic recovery prospects from Federal Reserve Chair Jerome Powell and concerns over rising coronavirus infections in some US states triggered the sharp selloff in risk assets over the past 48 hours. It brought the recent rally to a grinding halt.
 
 Wall Street analysts are pointing to the gap between fundamentals and valuation saying it was long overdue, and finally, the market listens.  While bulls will shrug their shoulder and view it as a technical correction and wholeheartedly believe in the continuous functional power of (QE) liquidity in the system., I am not getting involved in that debate today.
 
Regardless of what side of the fence you are on, you must concede we are at a critical inflection point where we will have to see which channel opens up and where the next 5 % move will take us. But if it is the covid19 station that turns on, watch out below as it is not going to be pretty. Certainly not going to judge it today as its Friday and the markets will try to settle in around current ranges and take a pause to reassess next week
 
Predictably everything opened super jittery this morning, given the markets panicked premonition from the covid-19 resurgence headlines. However, the fear has subsided with equity futures up more than 1% from the lows. And now the 5 % & 86 rule started to intrigue some of the reversion crowd. What I am referring to is that history suggests the markets have an 86% chance of being up the day after a fall of 5% or higher. But someone will undoubtedly take another run at downside before the days out.
 
There is a lot of focus on the three most populous US states for evidence of a continuation of the first wave of covid-19 infections in California and Texas and a building second wave in Florida. Houston, the largest city in Texas and the country’s fourth most populous, sees a sharp rise in cases at a more granular level, but this could be a result of increased testing rather than the fear of a secondary spreader. But I am just not clear with what is going on, and that is the problem dissecting the wheat from the chaff.
 
With volumes of money been parked on the side waiting for an opportunity to buy on dips., if the covid-19 case count decreases over the weekend, the reopening optimism could rule supreme on Monday, and this along could trigger the stock market newfound mob mentality to turn positive into the weekend.
 
 
I like the Euro, but that is a topic for next week, in the meantime, USDTHB has reversed the early morning drop to 30.935 from 31.23. THB crosses remain offered. The medium-term, however, and this may be more proximity empirical view rather than a momentum view. Still, I feel that local risk aversion and the hit to tourism remain underpriced.

About the Author

All views, news, analysis, quotes, or other information from The Trading Circle and its subsidiaries are general market commentary only and does not constitute investment advice. Before making any investment please consult your financial adviser.

Any questions? You can call us on 123 456 789 or email us at [email protected] any time to help you with your trading requirements.

Share on facebook
Share on linkedin
Share on twitter