On Tuesday morning, with everyone on the Eastern seaboard prepping for a blizzard and every market participant (from the “pros” all the way down to the “Sharons“) prepping for Yellen, former FX trader Richard Breslow is out with a survey of where we stand across assets.

Regular readers will note that much of what Breslow says in today’s missive has been discussed here at length over the past two weeks and as such, we’re throwing in some of our own charts.

Do note the bit about HY – we still contend that’s where the risk/reward scenario is most asymmetrically skewed to the downside.

Via Bloomberg

So far this year we’ve had a pattern of assets looking like they were beginning a sustainable trend, only to fail painfully for those who were predictably late to the party. But at the end of the day, the reversals have ended up looking more like corrections or pauses than the real thing. It’s been a good trading market in search of some irrational exuberance.

  • So where do we go from here? Should we continue respecting short-term extremes and the search for the illusive canary that will tell all? As much as we’d like to believe it’s economic cycles that will rule the day, for the foreseeable future, central bank reaction functions and geo-politics will continue to be the bellwethers we must follow
  • Although, I can’t resist a good mining story. As Bloomberg credit strategist Simon Ballard pointed out yesterday, “U.S. exchange-traded funds that invest in speculative- grade corporate bonds have started heading south this month. The iShares iBoxx dollar high-yield bond ETF has reversed all of its 2017 gains, having slipped from an historic high on Feb. 27. Meanwhile, the equivalent high-grade ETF is also now lower year-to-date”.




  • A sign that the market is accepting that rates are indeed going higher? That issuance is finally taking more to digest? Or just another correction that looks mild if you’ve ridden this thing for the last year? My hint: it may not matter as funds were marked-to-market at year-end
  • Just how hawkish will Chair Yellen be tomorrow? My guess is there’s little appetite to challenge her credibility at the moment. With Treasury yields where they are, it’ll really matter. It’s not 1994 redux. If it feels right, traders will go with it. Her press conference will be primus inter pares of this week’s market-moving news
  • Stay away from confusing the euro and the dollar. The ECB is struggling with its messaging. The dollar can go up against most things and still lose the appetite to beat its head against 1.05. Trade the easier pairs
  • And then there are equities. If 2400 holds in the S&P 500, it will be so obvious looking on the chart, with that nice big gap. What a convenient pivot, and it’s close. Use it.
  • As for commodities, accept that no one knows where they’re going. Keep repeating to yourself, “positioning, technicals and the dollar” to drown out grand supply and demand pronouncements. One thing is for sure, both crude and the Bloomberg commodity index had better hold right near here or another round of pain could be in the offing



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