Read on the Trading Floor - 23 Jan 2024
Today’s focus… China, ECB, XBT and more
Macro Themes At Play
Theme 1 - China Watch
Theme 2 - ECB Lagarde's under (staff) pressure
Theme 3 - More to come in equities...?
Theme 4 - Time to take profit?
Further reading and listening of note
Theme 1 - China Watch
Markets and humans love round numbers. 3000 - 2900 has been a clear line in the sand for CSI back to 2016 (chart below).
Once again we're on stimulus watch as we head into the Chinese NY, tracking if the government adjust the regulations that restricted the performance of the gaming sector, Trump returns to the WH (although Biden's Chip Act has been just as hawkish on China), Li and the cabinet invite home some of the 2trillon yuan that's currently offshore in corporate accounts, or Xi simply unleashes the animal spirits via a large infrastructure spend.
For now, the momentum continues south until we finally see Xi change path on the deleveraging of the property sector. The trade will come, it's a when not an if but we also waited for all of 2023 under the same expectations that a fiscal package was brewing, we may need to wait a little bit longer as Li’s cabinet are only “mulling” a decision to bring home the $278bln. Being early is as good as being wrong.
The NY Times - China Appears to Backpedal From Video Gaming Crackdown
Steno Research - CHINA WATCH: FROM A CONTROLLED DEMOLITION TO ANOTHER ROUND OF DAMAGE CONTROL?
WSJ - China's Stock-Market Rout Has Become a Political Problem
Bloomberg - China Weighs Stock Market Rescue Package Backed by $278 Billion
Source: Tradingeconomics.com
Theme 2 - ECB Lagarde's under (staff) pressure
This week's ECB meeting is too soon to implement any material changes to policy, but Lagarde is under pressure after her "staff" survey lamented her leadership as president (FT). It seems like Biden, Sunak and Bailey are not the only ones struggling for popularity. This week's ECB meeting should see rates unchanged and reiterate the ECB's message from Davos, that March is too soon, they remain data dependent, it's too early to declare victory, a pre-emptive cut risks refuelling inflation and as a result we'll see you in June. Lagarde's message will be "steady as she goes" but Steno Research highlight the downside risks brewing in the staff forecasts which opens the risk of an earlier cut.
Econostream Media - ECB Insight: No Bolts out of the Blue This Week
Steno Research - ECB Watch: Trading the January lull
- - EUR Liquidity Watch: Trading the forecast errors
LiveSquawk - Steady As She Goes? ECB Set To Hold Rates As Staff Condemn Lagarde’s Rule
Raiffeisen - ECB Watch: Stemming against markets (and data?)
JPM - Global Rates: January ECB meeting and Euro rate markets
ING - January’s ECB Cheat Sheet: Giving markets the cold shoulder
Theme 3 - More to come in equities...?
have been on fire, catching the turn in FCI in early Q4 as well as being one of the first to discuss the performance of the Russell Index during a POTUS election year. They've had excellent calls in NKY, SPX, CCMP, Semis and Rates to name a few. Their calls are grounded in back testing historical data. For example, today's Substack (Nasdaq Composite >50% Higher than 12/28/22 Low) looks at similar instances when the Nasdaq Composite recovers from such a trough and what it means for the (positive) returns in the coming year.
Subscribe below to track their ideas as well as their returns. They're one of the few research houses that also maintains a trade blotter and reviews their trades.
Theme 4 - Time to take profit?
Now that the ETF has been announced is it time for Grayscale to take profit?
and now that we've cleared out the stops sub $40k and dropped over 20% off the post ETF headline tweet, where will we find the longer-term 401k demand? The market is looking at FTX again, with the estate responsible for $1bln of GBTC outflows. "According to Bloomberg’s Katie Greifeld, there has been more than $3.4 billion in outflows over the last week and a half." (Source Bloomberg via The Pomp Letter)
Like CSI, being early is as good as being wrong, watch for a base in XBT price or sentiment red flag to start to getting back involved.
Source Bloomberg via The Pomp Letter
Coindesk - Mt. Gox Moves Seemingly Closer to Bitcoin Repayments For 2014 Hack Victims
ZeroHedge- Bitcoin Breaks Below $39k Amid FTX, MtGox Liquidation Chatter
- The Pomp Letter - Price Is Trying To Distract Everyone
Unchained - Is FTX to Blame *Again*?
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