State of The Markets

Author: MFMTeam   |   Latest post: Wed, 20 Oct 2021, 9:30 AM


Stocks Finished Q3 In The Red

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Stocks finished Q3 in the red. US stocks closed sharply lower on Thursday, with Dow (-1.59%) and S&P (-1.19%) to Nasdaq (-0.44%) and Russell (-0.94%) all in the red, after reports showed that unemployment claims increased unexpectedly and manufacturing growth slowed, though GDP was revised higher. The looming debt ceiling doesn’t help calm markets as investors seek safety in bonds, sending the 10Y benchmark lower to 1.49% and trending lower to 1.48% at writing. Dollar fell against safe havens Yen and Swiss, closed below the 94.50 handle.

Sudden fall in Dollar, sent both crude and gold higher that caught investors off-guard. Crude firmed above $75.20/bl as OPEC+ continue to cite supply chain concerns, while gold regained the $1750/oz handle as investors doubt Fed’s tapering to continue given weak employment. Elsewhere, iron ore trending lower back to $117/tn for October as the infrastructure bills came to an impasse.

In the FX space, medium to long term accounts seemed risk averse with heavy bids in Dollar, Yen and Swiss; while hedging with higher yields Loonie. Short term traders seemed more optimistic with bids in the trio comdolls and Yen in preparing for the RBA and RBNZ rate decision as August’s NFP was revised sharply lower (943k to 235k). Euro doldrums continue as Angela Merkel’s CDU lost the German election on Sunday adding more demand for the havens across the board.


OUR PICK – No New Pick

No new pick going into the weekend. More than $31b flowed into the short term money markets as of Sept 29th this week and this is the second time it’s that big in the past three months. US stocks continued another outflow close to $5b and it’s no brainer that we came back to where we started in June with these levels of outflows for the past 12 weeks which subsequently closed Q3 with a slightly bullish doji on the SPX. The next 3 months will be critical as any close below 4,000 as the year end will signal an evening star that may mark a due correction.

Trades updates: 

Equities: Currently we are holding 8 stocks – 7 longs and 1 short – and have approached maximum equities exposure. We are long AUY (21% undervalued) with dividends yielding 3.03%, T (14% undervalued) at 7.70% yields and COG (13% undervalued) yielding 2.02%. CLVS is currently 21% 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 (46% 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 (26% overvalued with 1.36 z-score).

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

Join us at MFM’s TradeCopy


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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