As we approach July 6 we are cautiously expecting the U.S. dollar (USD) to strengthen, as such we have till then to play out the 6th macro market swing-low strategy, writes Ziad Jasani from Toronto.

View my Market Strategy Session

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Recorded: 11:15 am, July 5, 2018,
Duration: 1:10:58.

We enter the back half of 2018 embarking on our 6th macro market swing-low.

The Trading Idea was engaged June 28, and premised on the following factors:

• USD setup for a cooling: The USD cracked down (-0.8% UUP) on June 29 driven by the EU’s “resolution” to their migrant-crisis. This short-term move alleviated credit and liquidity conditions for Emerging Markets (EEM), the Eurozone (EFA), supported Base & Precious Metals (DBB, Gold, Silver) and gave the trade war beaten-up Dow (DIA), Industrials (XLI) and Materials (XLB) a kick-start.

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•  Fed’s bank stress tests were positive, opening the door for Financials (XLF, KBE, KRE, KIE, ZUB-T) to turn-up.

• Short-term the Global Bond Market is setting up for a swing-high which would support in-flows to Equities and steepen the U.S. yield curve, making Financials that much more attractive.

• Our global risk-ladder presents a risk-on signal.

• Short-term technical tools (RSI, MACD, Bollinger Bands) on the Global Equity Market (ACWI) all support prices rising.

• All major trading blocs present between 0.5 to 2 standard deviations cheap over the latest 52 weeks.

• Seehofer’s resignation from the CSU party should still leave Merkel’s government intact; but the new leftist-Mexican president Obrador may stunt the swing causing less out-flow from U.S. Bonds and a pause in the June 29 crack-down of the USD.

We are not expecting the 6th macro market swing-low of the year to out-perform the last, as nothing tangible has happened to lessen-the-fears of trade wars into Q2 earnings season.

Hence, we are “spreading the bets” to a variety of asset classes congruent to the swing-low to play it out:

Currencies (UDN, FXE, FXF, FXB, FXC, FXA)

Commodities (GLD, CGL-T, SLV, CPER, SLX, KOL, DBB, DBC, GDX, XGD-T, SIL, XME) alongside the Equity components of the play: S&P 500 (SPY), Dow (DIA)

Industrials (XLI)

Materials (XLB)

Financials (XLF, KBE, KRE, KIE, ZUB-T)

and World Ex-US (ACWX, EEM, EFA, FEZ, ZWE-T, ZEM-T).

As we approach July 6 we are cautiously expecting the USD to strengthen, as such we have till then to play out the 6th macro market swing-low.

If we find the S&P 500 below 2,703, VIX > 17.4, and the USD rising early in the week, we must call-off the 6th macro market swing-low and start exploring the following short/inverse positions: SH, SDS, PSQ, SQQQ, DOG, DXD, RWM, TZA, EUM, YANG, HXD-T.

To learn more about investing and trading within the cannabis space for the back-half of 2018, join us for a complimentary 3-hour Online Workshop on July 14, 2018 (12 pm – 3 pm EDT). Click here to reserve your seat.