Will the Euro crash below 1.0635? *

Strong equity sell-off is coming

Central banks and governments world all over are into “debt monetization”. In the face of the abrupt economic stoppage that is the only thing that they can do. They need to get things moving. They are into major devaluation of cash against asset prices. This makes holding cash the worst place to be.

The Fed is directly or indirectly involved in virtually all risk assets now (not broad stocks, nor high yield corporate bonds yet).

Central banks have become the bid in risk assets in the near term, while inflation will become the bid in risk assets in the medium to term. This is why most are advocating to buy gold. Finally, gold will be an asset you want to own but not now.

As mentioned in the previous reports smart and seasoned hedge fund managers are dipping their toes and buying into stocks but mostly big caps.

But the best investors are on the hunt for companies that can survive this onslaught but are beaten up the most. They should give the biggest bang for the buck. Let’s look at the various asset classes.

Equities

Everything points to that current price action is still counter trend. The personality of the waves and the internals point to that. On Friday the NYSE a/d ratio was 4 to 1 negative and the TRIN was at.51 which means a fair amount of buying power was used to keep the Dow from falling more than 360 points. I think there is a strong sell off coming and it should be sometime this week.

Bonds

Bonds rose to 182^31 the area we had been mentioning in past reports. There is an outside chance it can rise to 185 but no further or we are wrong. When the down move starts it should be a strong one that should eventually take prices to 155.

Euro

Think Euro formed a high at 1.1148 on Mar 27. The decline from the high looks impulsive and can lead to a break below 1.0635 of Mar 22. A move above 1.1040 the high of Mar 31 would greatly decrease the odds of this happening.

Gold

Gold continues to be in a bear market rally. There is always panic buying in gold without making much headway. When it turns around investors are quick to get out as they are nervous. Or it could be that a syndicate group is playing these ranges. We continue to stick with our views on gold which is bearish.

Be safe. Be small. Be home.

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.