Macro Morning (Trading Week)

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By Chris Becker 

2018 is getting interesting as we head into the second and possibly third week of a major correction of heavily correlated risk markets. This all started by the big leap in 10 year US Treasury yields, indicating that the world’s largest money market – bonds – was signalling the end of an era of low inflation and monetary easing. The business cycle has passed its peak and is now turning down, and so we should expect corrections and embrace that volatility. There are plenty of opportunities for investors here to pick up the bones, while us traders will gratefully step in and fulfil the role of short sellers – and there’s plenty of selling!

Looking at the longer term view on stock markets first, the Shanghai Composite was actually the worst performer for the week, dumping right through three levels of support to almost hit terminal support at the psychologically important 3000 point level. Having absorbed the majority of the key releases last week, this is the key area to watch going ahead to see if any bulls are brave enough to remain around:

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