US Equities strong up day may be misleading

Abraham George Macro View

As the US election is getting closer many external factors can influence the presidency. One of them can be the border dispute between India and China in the Himalayas. We will expand on this a bit in the next report.

It is a long time since we talked about Tik Tok. Finally, ByteDance the owner of this silly app struck a deal with Oracle pushing Microsoft totally out of the equation. The agreement is not for a sale of TikTok to a US company. Oracle will manage the app’s user data in US with potential to access TikTok’s secret sauce (whatever that may be). Oracle is in a strong position to leverage on TikTok’s success in the US. Oracle shares were up 5% yesterday.

In other news, the ever rising chip maker NVIDIA struck a deal with SoftBank to buy its famous chip design unit Arm holdings. This will crown NVIDIA as the undisputed leader in this space.

Equities

The markets opened with a gap up yesterday. In recent weeks opening the week with a gap up is not unusual. Except for the last week in August we had a gap up every week in the last two months.

However yesterday’s gap up was slightly different. About 90% of S&P 500 stocks advanced yesterday indicating stronger breadth than prior instances. Since we know market measures are context dependent , strong breadth at the end of a fifth wave could be a sign of buyer exhaustion leading to a trend change. The risk is for a move up to 3415-3445.

Bonds

Only a move above 178^15 will force us to reevaluate our bearish view.

Euro

We believe the move up from 1.1753 on Sep 09 to 1.1918 on Sep 10 is corrective in nature. If the Euro closes above 1.1956 we have to reconsider our bearish view.

Gold

The key to maintaining our bearish view on Gold is a break below 1902. The back and forth moves in the last many days is projecting an upward sloping triangle indicating a break up at some point. So will wait to see how this plays out.

Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.