Closing Levels Are Key

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Price action on big data releases has often been more important than the release itself. Let’s see where things close today.

by Brent Donnelly

October 6, 2023

xkcd.com

Current Views

Go short USDJPY at 150.09

(limit order)

Stop loss 152.26

Take profit 146.57

October 6, 2023

Payrolls, Yields, Seasonals

The job market remains hot in both the US and Canada with headline job growth higher than expected in both releases and earnings still hot up North. This will make for a nervy weekend if we close at current levels in US yields as the respite we got for a few days was short lived and we’re making new multi-multi-year highs in yields again.

Let’s see if the market sells stocks and bonds all day or runs out of gas at some point. The reaction to data has often been more important than the data itself in this cycle. Stocks bottomed on strong CPI in June 2022, for example, while bonds topped on weak CPI in July 2023. Next week will be interesting given the concern about US yields, as we get another CPI release along with PPI. CPI day has been a big turning point for both stocks and bonds on multiple occasions.

US 30-year yield, 1991 to now

The 4.80%/4.90% area remains key on a closing basis in the 30-year. We are 10bps above that zone right now as I type this.

1-minute chart of the US 30-year yield after NFP

Equity seasonality also (finally!) turns bullish starting Monday and I’m keen to see whether seasonality can outweigh the many bearish factors stalking stocks as we move into Q4. The big levels in SPX have held nicely so far and 14500/14600 remains absolutely critical support for the NASDAQ.

If stocks and bonds find buyers, that would take the edge off EMFX as it has now sold off significantly and vol and skew in MXN (for example) have blasted to the top of the range. Here are the two charts:

Final Thoughts

Here’s an intriguing and odd academic paper. The paper gives you good ammo to make jokes about your friend the high-performing hedge fund manager.

What Beauty Brings? Managers’ Attractiveness and Fund Performance*

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4322134

Abstract: In this paper, we study the relationship between stock fund managers’ facial attractiveness and fund outcomes. Utilizing the state-of-art deep learning technique to quantify facial attractiveness, we find that funds with facial unattractive managers outperform funds with attractive managers by over 2% per annum. We next show that good-looking managers attract significant higher fund flow especially if the funds are available on Fintech platforms where their photos are accessible to investors.

via Tracy Alloway

Have a 5-star day.