As bond vigilantes know, you don’t mess around in fixed income; it comes for the quick and the dead. Yesterday the US Treasury yield curve flattened at its fastest pace since March, the spread between 2-year and 10-year Notes just 15 basis points. A snapshot as at yesterday’s close saw yields as follows: 2-YR 2.82 per cent; 3-YR 2.84 per cent; 5-YR 2.83 per cent; 10-YR 2.97 per cent and 30-YR 3.22 per cent. Yields on UK Gilts also fell suddenly on Monday, especially at the very long end which had got out of line in November.
To coincide with this week’s UN talks on climate change in Katowice, Poland (a major coal mining area), the World Bank announced to delegates of 188 countries that it will be allocating $200 billion between 2021 and 2025 to tackle climate change in the most vulnerable parts of the world. Half the money is to be spent on adaptation measures, the other half on curbing emissions.
DAX 30
Yesterday’s spike high and what looks like a false break above immediate trend line resistance and the support line taken from 2011’s interim low has all the hallmarks of a tussle at an important chart level. We remind: it has done nothing to alter the top-heavy chart pattern with a head and shoulders and horizontal neckline.
SHORT TERM TRADER: Square.
POSITION TAKER: Short; stop above 11600. Next target at 10700.
FTSE 100
A pathetic little bounce this morning doesn’t change the fact that this index has spent a whole month consolidating close to this year’s lows.
SHORT TERM TRADER: Stopped out on yesterday’s short squeeze. A bit cross, but not the end of the world as this market’s gone nowhere for 7 weeks already.
POSITION TAKER: Square.
S&P 500
Scathing write-ups in international press yesterday of the G20 summit – and in no time at all the flimsy communique and agreements begin to unravel. The index has stalled at November’s high and Fibonacci 61 per cent retracement level. All eyes on the bond market.
SHORT TERM TRADER: New short at 2778; stop well above 2820. Target 2620.
POSITION TAKER: Square.
BRITISH POUND/US DOLLAR
Commentators surprised the pound’s taking the Brexit storm so well. Pity the British public who can no longer stomach the commentators banging on about leaving the EU.
SHORT TERM TRADER: Small long at 1.2830; stop below 1.2695. Target 1.3150.
POSITION TAKER: Square.
EURO/US DOLLAR
Momentum’s been poor to middling for months.
SHORT TERM TRADER: Long at 1.1395; stop below 1.1260. Target 1.1600.
POSITION TAKER: Square.
GOLD
A bit of a spurt on short-covering but becoming almost overbought as it did when we got to these levels in October.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
