State of The Markets

Author: MFMTeam   |   Latest post: Tue, 19 Oct 2021, 10:41 AM


Stocks Rallied As Sentiments Improved

Author:   |    Publish date:


Stocks rallied as sentiments improved. US stocks rallied on Thursday as optimism returned post Fed’s dovish plan to taper and hike in late 2022. All indexes from Dow (+1.48%), Nasdaq (+1.04%) to S&P (+1.21%) and Russell (+1.82%) surged higher after reports from JP Morgan seeing S&P at 4,700 by year end and 5,000 next year. Yields on the 10Y benchmark surged to 144 basis points, the highest in 8 weeks, as Dollar (DXY) retreated to the 93 handle on early profit taking towards month end.

In the commodities market, crude continued its upward trajectory towards $73.50/bl as supply concerns remain towards winter and growing demand. Gold pulled back for the second day, closing below $1,750/oz, the first time in five months as fears subsided.

In the FX space, risk is definitely on as demand for Dollar receded across horizons, with Yen and Swiss on the offer sides, except for medium term accounts that remain cautious as Swiss seized the helm of demand. Other than that, comdolls are pretty much the order of the day.

OUR PICK – No New Pick

No new pick going into the weekend. What caught our attention this week was a steady flow of more than $2b/day to gold and silver ETFs (GLD, SLV, IAU) compared to a meager $800m/day to bullish Dollar funds (UUP). Though this is meager compared to almost $10b/day to short term money markets, it is still a trend to be reckoned with. It seemed that some part of the markets, as always, doubted Fed’s capacity to hike as the balance sheet had ballooned to more than $8tn now. Only time will tell.

Trades updates: 

Equities: Currently we are holding 8 stocks – 7 longs and 1 short – and have approached maximum equities exposure. We are long AUY (30% undervalued) with dividends yielding 2.94%, T (14% undervalued) at 7.70% yields and COG (14% undervalued) yielding 2.27%. CLVS is currently 22% overvalued with -7.19 z-score but trading central projects a rebound towards 5.62-5.87 where we will most likely close our positions. We remain bullish with VIPS (42% undervalued with 5.59 z-score), GT (47% undervalued with 1.28 z-score) and CRON (16% undervalued with 9.18 z-score) while bearish GE (25% overvalued with 1.36 z-score).

FX & Commodities: We have closed all FX trades pre-FOMC to book profits for the month.


This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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