Global Markets – Weekly Review 13

Weighing the Risks of a widespread, global Deleveraging.

New developments:

• Deleveraging — the monster slowly rears its ugly head.

  • A gradual, then classic “all-at-once”, regime change seems underway in global markets.

  • It first happened in Rates and then Currencies, as we’ve been discussing for weeks, and it has finally transitioned into Equities.

  • It’s early, but we are seeing more signals pointing to the risk of a widespread liquidation into later Q3. We’ll cover them throughout today’s post.

  • Leverage creates instability, and crowded positioning remains extremely vulnerable to a Volatility shift here.

  • Upside Alpha is turning into downside Beta — evidence strongly suggests Short Momentum could begin to work, for the first time in more than a year. We’ll cover those signals today.

• Further evidence that Stocks are on the other side of their Blowoff — and selling bounces MAY work for the first time in a year.

  • No bounce has been seen yet — a concerning behavior, similar to other historic reversals, as discussed earlier this week (here).

  • IF a bounce develops, look for these key signals in order to increase conviction on the Short side — which we’ll cover today.

  • Bull Trap failures are triggering across the board. Let’s weigh the evidence.

  • If these failures are confirmed, the risk of a Correlation-1 decline could be significant.

• Gold, Gold Stocks, Silver, Platinum — a clear downside reaction, after sharing my concerns earlier this week (here). Something very important is happening — which many seem unprepared for.

• Rates, the Yield Curve and the Dollar tracking as expected.

• Dollar-Yen, the best FX trade in years — the setup is still developing, watching next week closely. Big picture: everything hinges on getting this sequence right, as I wrote here.

• Japan Equities — no one’s watching, but they should (Part 2 — follow-up to last week’s key charts).

• Bitcoin — surged from key support levels highlighted. Scenarios tracking as discussed — updating those today.

80 updated Charts & Commentary on all major Markets — for your weekend reading:

A quiet summer may become a hopeful memory…