Spooky Sell Signal
The number of COVID cases reached a peak since the beginning of the pandemic. In some European countries, the number of daily cases is almost 5 to 10 times higher than it was during the Spring episode. Consequently, if a country went in lockdown at 1000 cases per day, a similar action should be in place at 10 000 cases. What would a second lockdown mean for the real economy and the stock market? Can we see the leading indexes at a historical high amid two lockdowns in a year? Or should we hedge against a downward scenario?
Many countries in Europe, including the United Kingdom and France, took actions towards a lockdown. The polls show that Biden victory is very probable and under the hypothesis of Democrats taking over the White House, we could expect a federal lockdown in the United States. By Christmas, the Western world could go back in the same situation it was in March. If this scenario becomes a reality, any additional stimulus or federal spending policy may be useless, and a wave of bankruptcies could hit the real economy. High observed default rates would directly impact the banks’ shares which are already at five years low. January could be a very complicated month, and all dues of the pandemic may be paid in full next year.
If the foreseeable correction expected in November does not occur, the market might plunge in January 2021. The quantitative easing may need to stop, and the US Treasury could redirect the funds to bailouts. Therefore, it is maybe the time to invest in out of the money puts and sell calls on the leading stock indexes.
Without great solitude, no serious work is possible. Pablo Picasso
No news is good news… This seems to be the case of what is going right now in most markets. Not many things emerged from the stock markets since last week. The leading indices remained in positive territory, continuing the tendency started after the mid-October dip. The volatility levels remained relatively low, as VIX, the leading volatility index remained at a similar level as in the previous week.
The US retail sales figures for September looked better than expected, and Pfizer announced that its vaccine moves forward in the FDA approval process. These positive signals provided limited support to the stock market, which ended the week cautiously.
Loop Industries is a Canadian based company developing an innovative sustainable plastic technology. Loop's share plunged earlier this week amid a negative report issued by a reputed shorter.
Hindenburg Research published a report on Wednesday targeting Loop Industries and its CEO Daniel Solomita. Hindenburg points that the claims of innovation in the company are not real and that Solomita sons, who act as lead scientists for Loop, "appear to have no post-graduate education in chemistry and list no work experience other than Loop".
After the release of the report, Loop's stock went in disarray and found an
equilibrium only towards the end of the week. Given Hindeburg's
track-record, there are meagre chances of a positive outlook for Loop
Industries.
Euro Bund is the crucial indicator of the state of the bond market in the EuroZone. The second wave of the pandemic forced the European Central Banks to continue its policy started in the spring in order to help the member countries to face economic distress.
The recent increase of the Euro Bund in October might deliver an interesting
signal about the foreseeable fiscal and monetary policy of the Union in a
post-pandemic world. In March, there were talks in Brussels about issuing
"perpetual bonds" to cover the costs of the crisis. Parts of Europe entered
already a second lockdown. Thus, the current situation will require a
massive bailout, and for achieving this, the only option for Frankfurt would
be to issue "perpetual bonds".
Light crude oil prices fluctuate since September in a tunnel centred around
38-39 USD per barrel. All other oil contracts follow a similar dynamic. It
is almost like oil prices follow a mean reversion dynamic.
In the
early 1990s, it was believed that commodities and particularly oil prices
follow a mean-reverting process around a level that reflected the physical
supply-demand equilibrium. Since those times, oil became the object od
financialization as many investment banks took positions in this market.
The mean-reverting model did not work for the past 20 years. If oil
goes back to mean reversion, then this does mean several things:
Nasdaq continued to evolve into positive territory above 11,500 while the Dow Jones kept the gains from the previous week reaching 28,600 points. We expect to see the leading stock indexes beginning a bearish pattern as we are approaching the US elections and a significant swing is expected in November. The perspective of a second lockdown could plunge the stock market as it did in March, earlier this year.
As predicted Bitcoin’s price managed to climb at 11500, before retreating
towards the end of the week above the 11,300 level. The leading
crypto-currency is consolidating its positions. In the case where Democrats
take over the US Senate and facilitate the way for a more conservative tax
policy, there are good chances to see Bitcoin soaring above 12,000 and even
higher.
General Disclaimer
The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.
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Spooky Sell Signal
Gold Shines at New Highs
The ECB Cuts Again
Slowing Disinflation
Golden-Week Rush
China’s Massive Package
The Fed’s Big Rate Cut
The ECB Cuts Again
Banks Turn Bearish On China
Million-Dollar Gold Bar
Bonds Are Back
Black Monday
Diverging Rate Decisions
Still Strong
Smaller Is Better
The Name Is Bond, Green Bond
Landslide Victory
AI-Frenzy Takes a Break
Bye Apple, Hello Nvidia
The Fed Stays Put
An Indian Rollercoaster
The Name’s Bond, Convertible Bond
Nvidia Does It Again
A Small Relief
From Boom To Bust
Higher For Longer
Still Magnificent
Halve And Havoc
Stubborn Inflation
Choc Shock
An End Of An Era
Britain Bounces Back
China's Goal
Bye iCar, Hello iAI
Nvidia Beats Expectations
Germany Overtakes Japan
Riding The Dragon
China’s Falling Behind
India Outshines Hong Kong
Aging Dragon
US Inflation’s Accelerating
Tesla Lost Its Crown
2023 Market Wrap-Up
The Last Samurai
Fed Teases 2024 Rate Cuts
Bond Market's License to Thrill
Cyber Week Bonanza
OpenAI's Leadership Shuffle Drama
Inflation’s Cooling In The US And UK
Back Into Deflation
Triple Hold On Rate Hikes
The US Economy Is Still Flexing Its Muscles
Inflation’s Refusing To Come Down
Investors Are Bracing For A Dip
An End In Sight
Rate Hike Recess
End Of An Era
China's #1 Ambitions Are Fading
Americans’ Piggy Banks Are Running Low
Trying To Break The (Wage-Price) Spiral
China: A Nation In Deflation
Uncle Sam Gets Downgraded
Twin Hikes
Stagnating Dragon
A Tale Of Three Inflation Stories
Silver Is Shining Bright
UK Inflation: Defying Gravity
The Fed Calls A Timeout
A One-Two Punch
Shrinking Dragon
Keep Calm And Carry On
The AI-ffect Of The AI Mania
SLOOS: Crunch Time Looms
Last Republic
LVMH Pops The Bubbly
India Takes The Population Throne
The End Is Nigh
OPEC Drops the Pump
Why Gold Is Glittering
Can't Stop Won't Stop
To Hike Or Not To Hike
China’s An Underachiever
Cash Is King
What Energy Crisis?
The Name’s Bond, Japanese Bond
The AI War Has Begun
Hikes Everywhere
What Recession?
Shrinking Population
Grab Your Box And Leave
A Gloomy Prediction
It's Darkest Before The Dawn
Elon Fires Himself…
Triple Whammy
No More Zero-Covid?
Eight Billion And Counting
Another One Bites The Dust
No Santa Pause
Big Tech, Big Disappointment
The Lettuce Won
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