S&P 500, Dollar, AMC, USDCAD and USDTRY Talking Points:
- Full speculative liquidity is back online after the extended US and UK holiday weekends, but the bearing on risk appetite has not be clarified
- Interest rate speculation remains a top concern for the Dollar as warnings of US labor shortages add to inflation concerns
- While there are highlights for event risk, like the Aussie Dollar’s response to RBA and Aussie GDP, a broader volatility impact has followed EM currencies
Topping Off Liquidity Stirs Volatility But Still a Mixed Risk Picture
After an extended holiday weekend, the US and UK markets are back online and contributing to liquidity. While there remains a structural curb on intent influenced by a market running far beyond its fundamental moorings, there has been a notable jump in volatility for certain assets following critical themes (eg inflation) or are currently being bombarded by scheduled event risk (eg the Australian Dollar). One notable slip this past session which brings uncertainty back into the picture for Wednesday was the slide from US markets which started almost immediately after the a strong opening gap. The S&P 500 posted an eighth consecutive bullish gap on the open only to end the day with a slight loss relative to Friday’s close. This has left us with a decelerating rally from the sharp May 19 reversal…and just shy of retaking the record high set a month ago.
Chart of the S&P 500 with 100-Day Moving Average and 4-Day Historical Range (Daily)
Chart Created on Tradingview Platform
General risk trends remain disjointed; and pushing record highs against a backdrop of lagging fundamental support, conviction is of ever-greater importance. I maintain that the prevailing trends of the past year and years are bullish for speculative measures like the US indices, but the greater ‘potential’ (in other words the more aggressive move) would be a shift towards outright risk aversion. For the time being, there is no clear undercurrent to follow across the entire market, but there are still highlights for performance. The Nasdaq 100 to Dow ratio highlighting the preference of tech shares – the leading thematic over the past five years – slipped a little further this past session. The cryptocurrency market seems to have lost a lot of the shimmer of the first three months of the year with Bitcoin carving out a wedge following its head-and-shoulders breakdown last month. Meme stocks seem to be the asset du jour with the BUZZ ETF riding high but short of March and April peaks, while AMC has picked back up the torch. The stock looks little change until you realize the doji came after a remarkable 22 percent gap to the upside – and the market proceeded to rally another 20-plus after the close.
Chart of AMC and 20-Day Mov Avg Disparity Overlaid with BUZZ…
Read More: Dollar Building More Rate Speculation Breakout Pressure, EM Currencies