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Market Wrap
The Deputy Governor of the Bank of England was the only Tier-1 data point scheduled today. Nevertheless, there have been some global macro developments that have the potential to disrupt a lot of areas of the markets.
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The VIX is still relatively high and that is allowing the ranges to carry on expanding within the risk assets. If things get more bearish across the global macro, I expect the VIX to carry on rising from here.
Before we get into the scheduled news data points, there is a worrying development on the Russia/Ukraine border as Russian President Putin has amassed an army in waiting for what looks like an invasion. We have been here before where Russia in plain sight aided Ukrainians who have more of an allegiance to Russia and at that time there was talk of a bit of a land grab, but instead, Putin backed away. Biden and Putin have been meddling in each other’s business for some years and it has lots to do with the Presidential Election, the Nord Stream 2 pipeline, and a submarine base on the Black Sea. The European Union also has a hand in provoking the Kremlin as they insist on being an expansionary force that is forever looking to push into the border countries of Russia. Deploying weapons that could potentially reach Red Square and being generally provocative. For the people in Eastern Ukraine, many would probably be a lot happier being mothered into the Russian Federation as they speak the mother tongue and have no interest in being European.
Biden and Putin are scheduled to have a telephone conversation tomorrow, but not before Biden has rung around the NATO and European allies to see what can be done.
Rather than going to war with Russia over Ukraine, the west has succeeded in putting various Western sympathizers into positions of power. They are also talking about weaponizing the SWIFT payments system that all banks use for interbank lending. Cutting Russian off from the SWIFT banking network would force Russia to strengthen its allegiances to China and other less friendly countries. The USA often weaponizes the US dollar with sanctions and this is one major reason why Russia decided to get out of all US dollar assets in its National Wealth Fund and instead bought gold.
The ActivTrader sentiment indicator shows that most of the retail traders on the platform are bullish Cable after this morning’s update from BoE Deputy Governor Broadbent. Later in the afternoon the Deputy Governor felt it necessary to Tweet out “I Really Don’t Think There’s A Risk Of A 1970s Style Inflation Spiral”, to which JP Morgan decided to announce they are positioning for a UK rate hike in February 2022, not December 2021.
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The pound has held up relatively well against the US dollar but has done nothing to suggest a market reversal is about to take place. If the price was to be close above a recent swing high, the stochastic oscillator could offer a confluence of positive divergence, should it not make a lower low in between time.
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As of the London close, the stock markets around the west are all green as there has been no concern regarding the COVID-19 Omicron variant. Contrary to the stocks traditionally linked to economic recovery, the Nasdaq 100 was dragged down by falling technology shares, including Tesla and Nvidia. In response to a whistle-blower’s claims that Tesla’s solar panels were defective, the SEC opened an investigation which rattled investors. The S&P500 has once again clambered back on top of the daily 50 EMA and hasn’t taken out yesterday’s low beforehand. This morning I warned that if the S&P500 were to have taken out yesterday’s lows and headed towards the market structure around 4456, we could have pushed down through to the daily 200 EMA. For the bulls to get excited about all-time highs again the markets will need to get through the compression that preceded the Thanksgiving holiday markets.
