DXY was flat Friday night:
The Australian dollar was shoved to the 70 cents cliff again but hung on grimly:
Gold is at a cliff of its own:
Oil has fallen off of its cliff:
Metals can feel the change in the wind:
Miners held on:
EM stocks fell:
Junk is OK. We’ll need to see more downside here if this correction is to get moving:
Strikingly, the Treasury long-end steepened sharply despite risk-off. This is the ‘blue wave’ of hoped-for stimulus but it’s raising the possibility of a risk parity shock as bonds fight the Fed:
Stocks have described a stunning rerun of the 2000 Nasdaq double-top but are not yet through the base:
The virus is running wild in Europe and the US. Pretty much all of Europe is locked down to some degree now. From complete closures in the UK and Belgium to lockdown “lite” in Germany and France. The impact has begun to appear in fast-moving demand data, the supply side is slower moving and still OK:
If Joe Biden wins the election this week then the US will follow as local authorities are emboldened to take the virus more seriously. Private demand has already begun to roll:
The new virus shock not yet appeared in US jobs data although the recovery has stalled:
Yet the fiscal cliff is underway and will play out for two months into a new year nightmare if we don’t see a lame-duck fiscal package:
But, if we do, then yields in the US are already blasting away from Europe:
This is not a good set-up for the Australian dollar. It has hung on manfully at 70 cents recently. But DXY appears set to rise either way:
- A ‘blue wave’ sees US growth and yields dramatically outstrip Europe. This will trigger a relief rally for risk in the short term but for how long as European growth and yields fall dramatically behind the US and the ECB outstrips Fed easing?
- If Biden wins the White House but the Republicans retain the senate then it’s another all-around growth shock as US lockdowns return without fiscal support and DXY runs on the safe-haven bid.
- If Trump wins then it’s back to tariffs anyway and DXY stays strong.
SPX is one bad day from taking-out support on its massive double-top. The Australian dollar remains its patsy:
The charts are all set up for a major market accident but they are not yet broken. Australian dollar included.
