Chart 1
Oil is down 25% from its high.
Oil prices have collapsed in July and continue their downtrend today, as WTI Crude futures are trading below 90$/barrel. This was the price of WTI before the invasion in Ukraine and is yet another example of how things can turn around in an ugly way, when too many traders/investors chase the same idea, after a significant rally in the price. Fundamentally, one could argue that oil prices will remain elevated in the near future, as the situation between Russia and Ukraine is far by being under control. But also from a fundamental point of view, a slowdown in economic activity or a recession usually hurts the prices of commodities as well. For the moment, Oil is in bear market territory, if one applies the (relatively arbitrary) definition of a 20%+ drop from the most recent high. On the positive side, this drop, if it is sustained, will help inflation readings in the following months to demonstrate that we have potentially already seen the worst of it.
Chart 2
Nasdaq-100: A new bull market or failure at resistance ?
The Nasdaq-100 index is up almost 20% from its low in mid-June. As is the case with defining bear markets, a 20%+ increase from the most recent low automatically makes it a candidate for a new bull market, if we apply this rule ! However, as one can see in the chart, the index is testing significant resistance (dotted red line), which could cap its ascend for now. Given the macroeconomic environment and the possibility of a recession as well as the FED's ongoing campaign of still increasing interest rates, the latest rally might as well be another "bear market rally", as it happened in March. Back then, the rally stopped at 13% from the lows. A "bear market rally" means that the index will fail at this resistance and resume its drop to the previous or new lows. History will tell if we are in front of a new bull market or a continuation of the previous bear market, which just had a pause.
Chart 3
The EUR is creeping higher after touching parity with the USD.
The EUR has been trending higher since the day that the 1.000 against the USD appeared on our screens. The forecasts that it will soon trade at 0.95 or even 0.90 still exist out there by various analysts. For the moment the EUR has been creeping higher, trading at around 1.0230 against the USD and defying the gloomy forecasts. We are not in the business of forecasting foreign exchange rates. However , the extreme positioning of the market and the extreme consensus/group thinking that the EUR will soon collapse below 1.00 usually mark the low of the common currency. A rise towards 1.05 or even 1.10 is not out of the question. Especially if one thinks that we have seen the peak in US yields, as the bond market has been telling us for the last few weeks.
Disclaimer
• The content of this document has been produced from publicly available information as well as from internal research and rigorous efforts have been made to verify the accuracy and reasonableness of the hypotheses used. Although unlikely, omissions or errors might however happen.
• The data included in this document are based on past performances and do not constitute an indicator or a guarantee of future performances. Performances are not constant over time and can be positive or negative.
• This document is intended for informational purposes only and should not be construed as an offer or solicitation for the purchase or sale of any financial instrument and it should not be considered as investment advice. The market valuations, views, and calculations contained herein are estimates only and are subject to change without notice. Any investment decision needs to be discussed with your advisor and cannot be based only on this document.
• This document is strictly confidential and should not be distributed further without the explicit consent of Kendra Securities House SA.
Sources of the charts: Factset S.A.