Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

FX & Rates

<p>Two trends that are becoming clearer in these markets is the rise in yields and the rise in energy prices.</p><p>Together they spell out a ‘reflationary’ stance which is inter-related to the market preparing for Fed tapering asset purchases. This is further supported by the recent move higher in US breakevens which are now set to trend up. While these may appear to be positive developments and signs of markets moving in the <em>right</em> direction, they do not come without risks.</p>

Two trends that are becoming clearer in these markets is the rise in yields and the rise in energy prices.Together they spell out a ‘reflationary’ stance which is inter-related to the market preparing for Fed tapering asset purchases. This is further supported by the recent move higher in US breakevens which are now set to trend up. While these may appear to be positive developments and signs of markets moving in the right direction, they do not come without risks.

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

<p>As rates in the US have started rising again, their correlation with EM rates has reasserted. We compare the current sell-off with the 2013 Taper Tantrum and the one earlier this year, which shows that the sensitivity of EM rates to the US has increased. While the increase in the beta leaves EM rates more vulnerable to a continued rise in the US rates, we are inclined to look for oversold levels in select EM countries to receive long-end rates hedged with payers or initiating flatteners.</p><p>Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.</p>

As rates in the US have started rising again, their correlation with EM rates has reasserted. We compare the current sell-off with the 2013 Taper Tantrum and the one earlier this year, which shows that the sensitivity of EM rates to the US has increased. While the increase in the beta leaves EM rates more vulnerable to a continued rise in the US rates, we are inclined to look for oversold levels in select EM countries to receive long-end rates hedged with payers or initiating flatteners.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Rising Sensitivity of EM Rates to the US

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>Last week's FOMC announcement was more hawkish than expected, and the market took the news in stride. Market dynamics have improved significantly since the announcement, which has us inching toward an outright bullish outlook; we are just waiting for price breakouts from cyclical areas including small-caps (IWM), Financials (XLF), and Energy (XOP).</p><p>Charts highlighted: <strong>COP, EOG, DVN, </strong><span><strong>CLR, FANG, MRO, XEC, COG, AR, MUR, USB, PNC, FITB, KEY, RF, CMA, SIVB, WAL, EWBC, ZION, PACW, UMPQ, FHB, </strong>and <strong>CATY.</strong></span></p>

Last week's FOMC announcement was more hawkish than expected, and the market took the news in stride. Market dynamics have improved significantly since the announcement, which has us inching toward an outright bullish outlook; we are just waiting for price breakouts from cyclical areas including small-caps (IWM), Financials (XLF), and Energy (XOP).Charts highlighted: COP, EOG, DVN, CLR, FANG, MRO, XEC, COG, AR, MUR, USB, PNC, FITB, KEY, RF, CMA, SIVB, WAL, EWBC, ZION, PACW, UMPQ, FHB, and CATY.

10-Yr Treasury Yield Breaking Out; Downgrading U.S. Consumer Staples and Utilities To Underweight

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Korea Stock Exchange KOSPI 200 / Technical Analysis

<p>Monday's turn call to sell down longs and put on additional shorts panned out. Now we are positioning for a mild bounce into the month/quarter end to lean on shorts. October still expected to see another leg down. Bigger cycle date comes in near October 7-8th.</p><p>Top shorts in Asia are Korea (due to undershoot on the back of SEC) and HSI (nearing a low) and Taiwan as the recent addition to our short conviction group.</p><p>A50 flirting with big breakout resistance at 15,500 and will drive H share direction. A shares show potential to buck the region negative trend if the A50 clears 15,500 pivot.</p>

Monday's turn call to sell down longs and put on additional shorts panned out. Now we are positioning for a mild bounce into the month/quarter end to lean on shorts. October still expected to see another leg down. Bigger cycle date comes in near October 7-8th.Top shorts in Asia are Korea (due to undershoot on the back of SEC) and HSI (nearing a low) and Taiwan as the recent addition to our short conviction group.A50 flirting with big breakout resistance at 15,500 and will drive H share direction. A shares show potential to buck the region negative trend if the A50 clears 15,500 pivot.

SPX Trendline Rejection/Asia Short Targets

US Treasury (10 Yr Generic) / Technical Analysis

<div>We have been bullish yield from early August with the US 10yr meeting our 1.50/55%  tactical target where a stall is due before resuming the yield rise. US 5yr yield exhibits a more aggressive bull wedge. </div><div></div><div>This yield spike is a key input into a DXY drive to and top near the 94 zone. A yield breakout above 1.55% would be more dollar supportive.</div><div></div><div>Headwinds: Equity weakness in October would induce a yield pullback from noted resistance points. Tamer inflation data would also be a driving force. </div><div></div><div>Yields will find it harder to rise in late Q4 given odds of a rate hike delay (shift to 2022) on slower growth and growing concern of a policy mistake.</div>

We have been bullish yield from early August with the US 10yr meeting our 1.50/55%  tactical target where a stall is due before resuming the yield rise. US 5yr yield exhibits a more aggressive bull wedge. This yield spike is a key input into a DXY drive to and top near the 94 zone. A yield breakout above 1.55% would be more dollar supportive.Headwinds: Equity weakness in October would induce a yield pullback from noted resistance points. Tamer inflation data would also be a driving force. Yields will find it harder to rise in late Q4 given odds of a rate hike delay (shift to 2022) on slower growth and growing concern of a policy mistake.

US Yield Spike Meeting Targets but More in Store After October Lull

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US Treasury (10 Yr Generic) (GT10 GOVT)

Bonds & FX: Navigating Another Taper

As US yield rise with higher energy prices, we attempt to provide clarification in FX markets where some emerging markets are at risk of suffering...

Shyam Devani

Rates 10y Dashboard: Rising Sensitivity of EM Rates to the US

When we compare the current sell-off in EM rates with the 2013 Taper Tantrum and the one earlier this year when US rates sold off similarly, we...

Gautam Jain, PhD, CFA

10-Yr Treasury Yield Breaking Out; Downgrading U.S. Consumer Staples and Utilities To Underweight

The 10-year Treasury yield broke above the key 1.38% resistance level last week, a bullish signal for the broad equity market and also a bullish...

Vermilion Research

SPX Trendline Rejection/Asia Short Targets

Monday's turn call to sell down longs and put on additional shorts panned out. Use a month/quarter end bounce to lean on shorts. October to see...

Thomas Schroeder

US Yield Spike Meeting Targets but More in Store After October Lull

US 10yr break above 1.37% is meeting our 1.50/55% target where a stall is due before resuming the yield rise. US 5yr yield exhibits a more...

Thomas Schroeder

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